Insurance groups failing to implement FCA new rules on switching
Rules were introduced in April 2017 requiring firms to show how much a customer paid in the previous year and their proposed renewal premium. They also require firms to show a prominent, clear and straightforward message to encourage customers to shop around.
In spite of warning in October about failings, some insurance groups are still not meeting the targets. Among those under fire, the RAC has been forced to apologise to its breakdown customers, after failing to meet the new rules. The firm was failing to display the prior and current year premiums, and shopping around message as key information in its breakdown policy renewal documentation. It will compensate a number of its customers.
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 particularly poor practice in firms and will continue to do so where we see firms not being transparent. As we said in October, we expect other firms to take notice of these issues, to look at what they are doing and to make sure they are getting it right.”
The FCA has found four main areas where companies are failing to meet standards: failing to implement the new rules for all products and customers; misstating the previous years’ premium; leaving out the shopping around message or not presenting it in a way which draws the reader’s attention; and failing to properly identify all customers who needed renewal information either because of system error or a mistaken interpretation of the type of customer that is captured by our rules.
The FCA expects firms and senior management in those firms to take immediate action to ensure they are compliant.
Dan Hutson, head of motor at comparethemarket.com said: “The mandate to include the previous year’s premium in the renewal notice was introduced a year ago, so it is very concerning to see that some providers are still not doing this. The lack of transparency shown by a number of insurance providers is, at best, a gross oversight and, at worst, an effort to hide the renewal price hikes and the benefits of switching provider.
“Over the past few years motorists faced constant hikes in their insurance costs, partly driven by Government changes such as increases in Insurance Premium Tax and changes to the Ogden Rate. The positive news is that the FCA is keeping a weather eye on the companies attempting to side-step the rules.”