RAC failed to tell customers about price increases
Organisation may have to pay compensation to drivers who ended up paying over the odds
MORE than a million families insured by the RAC could receive compensation after City regulators found it failed to disclose annual price rises to customers.
The RAC is contacting affected customers, who may have paid significantly over the odds for breakdown insurance, as premiums rose without their knowledge.
Those who have overpaid could receive the price difference between the old and the new premium as compensation, the Financial Conduct Authority said.
The RAC’S failing comes despite new rules being brought in by the FCA a year ago forcing insurers to show customers their current premium compared with the next year’s price.
The difference is called a “loyalty premium” as insurers disproportionately increase the cost of insurance for customers who do not move to another insurer when their policy runs out.
Loyalty premiums can raise the cost of insurance by as much as 80 per cent year on year, according to cases seen by The Daily Telegraph.
The RAC has 2.2million individual members and covers 8million roadside assistance customers, but only customers whose policies ran out last year are affected.
The rules, introduced in April 2017, require firms to clearly show the insurance premium a customer paid last year, alongside their proposed renewal premium.
They also require firms to show a prominent, clear and straightforward message to encourage customers to shop around.
The FCA has found that firms are still failing to properly implement the rules despite issuing a further warning October about failings.
Jonathan Davidson, executive director of Supervision – Retail and Authorisations at the FCA said: “It is simply unacceptable to see that some firms are still not being properly transparent with their customers a year on from the introduction of the rules. Firms failing to get this right may have led to consumers losing out as they do not have the right information to decide whether or not to shop around. We have already acted where we have seen in particularly poor practice in firms and will continue to do so where we see firms not being transparent.”
An RAC spokesman said: “While our breakdown policy renewal documentation did accurately contain all the necessary information, we recognise that some of the key information in our letters was not as prominently displayed as it should have been. We continue to be committed to giving members clear and fair information so they can make the right decision and are contacting those affected to ensure they are satisfied.”