Premium transparency to help you get a better deal
INSURANCE firms will be required to display details of last year’s premium alongside renewal quotes under plans to help consumers shop around for a better deal.
The Financial Conduct Authority (FCA) proposals, which cover general insurance providers, follow concerns that some loyal consumers are paying more for sticking with the same firm year in, year out.
As well as getting poor value, they may also be renewing policies which are no longer suitable for their needs.
The plans, which should also make it easier for people to haggle for a better deal, would cover policies such as motor insurance, home insurance, pet insurance and medical insurance.
The FCA said it had found evidence of low levels of consumer engagement, switching, and a lack of competition when some types of insurance policies were renewed.
Christopher Woolard, director of strategy and competition at the FCA, said: “We hope the proposals encourage more people to shop around for the best product for them.
“It is important that insurers give their customers the information they need to do this and ensure they’re treating their customers fairly.”
In 2014, the FCA launched a largescale trial with more than 300,000 consumers across the UK to test reactions to different types of information provided at renewal and whether this prompted people to switch.
It found that the inclusion of last year’s premium on renewal notices had the greatest impact, prompting between 11% and 18% of people to either switch provider or negotiate a lower premium when prices sharply increase.
Giving an example of how firms might disclose last year’s premium on renewal notices under the proposed new rules, the FCA said a firm could say: “Your renewal quote for this year is: £200.00. Last year’s premium was: £150.00. This is £50 more than last year. Remember: Check your cover. Shop around for the best deal.”
The FCA is also proposing that firms identify and specifically prompt those consumers who have renewed the same product four times or more to encourage them to engage.
The FCA said that feedback on its proposals should be received by March 4, 2016. The proposals could come into force around a year to 18 months after that date.
Consumer campaigners and insurers welcomed the proposals.
Which? executive director, Richard Lloyd, said: “The Financial Conduct Authority’s proposal is good news for the thousands of people who supported our campaign for insurers to show last year’s premium on renewal letters.
“This simple change should help people save money by prompting them to shop around or haggle for a better deal with their current insurer.”
A “we don’t want to pay a premium” campaign was launched by Which? last year, receiving more than 30,000 signatures.
Previous research by the consumer group among more than 2,000 people found that more than two-thirds (68%) of people said that having last year’s premium would prompt them to look for a better deal with other insurers and 64% would be more likely to haggle for a discount with their current insurer if they knew last year’s premium.
Huw Evans, director general of the Association of British Insurers (ABI), said: “Publishing last year’s price alongside the renewal quote up front is a good idea which insurers themselves proposed to the FCA last year.
“This will help customers and encourage them to engage with the policy they choose and what they get for their money.
“It will take time to implement such a big change across the whole insurance industry and we will work closely with the FCA to ensure this welcome reform is delivered on a realistic timescale.”
Andrew Hagger, founder of website Moneycomms, said: “Hopefully this move will shake up some of the less competitive insurers and drive down the cost of cover, whilst the ability to see price increases in black and white will undoubtedly prompt greater levels of switching.”