FCA market study on pricing practices: Summary of proposed remedies
October 7, 2019 Dougie Willins
On Friday 4 October the FCA published its proposed remedies to address pricing practices in the UK personal lines insurance market. Make sure to read our summary of the report and analysis of the proposals.
This blog post summarises the 11 remedies that are implied in the report, categorised by the three stated objectives.
Objective 1: Remedies to tackle high prices for consumers who do not switch or negotiate better deal
Restrictions on price increases to renewing customers
Restrictions on the use of particular factors in setting prices and determining margins, for example the consumers’ likelihood of switching or negotiating a better deal
Restrictions on the price level relative to a benchmark such as the new business price for the policy
Requiring firms to move consumers on to cheaper equivalent deals… these consumers could be switched to the price (and level of cover) offered to an equivalent new customer with the same insurers
Require firms to engage with customers who have renewed the same policy consistently and who are paying high prices
Objective 2: Remedies to tackle practices that discourage switching
In relation to auto-renewals:
A ban or restriction on the use of auto-renewal of insurance policies, including where there has been a change in the price.
Making auto-renewal opt-in only
Making it easy to decline auto-renewing policies at the time of purchase and at renewal
Ensuring that firms make it as easy to exit a contract as it was to sign up
Objective 3: Remedies to make firms be clearer and more transparent in their dealings with consumers
Requiring firms to make it clear to consumers that renewal prices have increased because they have not switched for a number of years. This could also include requirements for firms not to use statements that could discourage consumers from switching
Requiring firms to publish information about their pricing practices or differences in prices between customers of equivalent risk
Dougie is a Manager at Oxbow Partners and leads our London Market task force. He focuses on projects helping our Corporate & Specialty clients on a variety of topics including digital distribution, underwriting transformation and technology strategy. Prior to Oxbow Partners, Dougie started his career at BCG and holds a master’s degree in mechanical engineering from Durham University.