U.K. regulator proposal aims to save policyholders $4.7 billion
The FCA's proposed changes seek to enhance competition and ensure consumers receive fair value from their home and auto insurers.
The U.K.’s Financial Conduct Authority (FCA) recently announced a proposal to change how insurance companies price home and car coverage. The restructure will reportedly save consumers 3.7 billion pounds ($4.7 billion) over 10 years by preventing insurers from charging renewing clients more than new ones, the regulator said in a statement.
“We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in the future and put an end to the very high prices paid by some long-standing customers. The package would also ensure that firms focus on providing fair value to all their customers. We welcome feedback on the proposals,” Christopher Woolard, interim chief executive of the FCA, said in a release.
According to the FCA, the new rules will allow insurance firms to set new business prices but will prevent them from gradually increasing the renewal price to consumers over time other than what is appropriate according to changes in customers’ risks.
Current regulations allow insurers to raise prices for consumers that renew with them year-on-year. “While some people shop around for a deal, many others are losing out for being loyal,” said the FCA. “Firms target price increases on consumers who are less likely to switch and use practices that make it harder for people to leave. At the same time, firms do not always offer regular switchers at their lowest prices.”
The regulatory body also is considering other measures to create a fairer insurance marketplace, including:
- Product governance rules that will require firms to consider how they offer fair value to all insurance customers in the long term.
- Requirements for firms to report specific data sets to the FCA.
- Rules that will make it simpler for customers to stop automatic renewal across all general insurance products.
The FCA also recently made headlines as the crusader behind a business interruption insurance test case that it brought forth in support of policyholders seeking coverage for COVID-19 losses. In September, the London High Court ruled in favor of the policyholders on most critical issues in the case. Multiple insurers are now contesting the decision.
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