Insurers told to disclose last year’s premiums on renewal notices
General insurance providers have been told by the Financial Conduct Authority (FCA) to disclose last year’s premium at each renewal by 1 April 2017.
In addition, renewals will also need to include text to encourage consumers to check their cover and shop around for the best deal.
Further, insurers will be tasked with identifying customers who have renewed with them four consecutive times, and give them extra information to encourage them to compare quotes and cover elsewhere.
Lastly, where a consumer’s circumstances have changed during the course of holding their policy, firms must give an annualised premium reflecting any mid-term adjustments, instead of last year’s premium.
The move comes after the FCA initially proposed the measures in December 2015 following a trial of 300,000 insurance customers which found that showing the previous premium on renewal notices was the best way to increase consumer engagement.
However, Kevin Pratt, consumer affairs expert at MoneySuperMarket, said the measures have failed to address automatic renewal.
He said: “The FCA said it wanted to increase transparency and engagement but it has failed on one of the industry’s worst practices: auto-renewal. Our research shows that consumers are losing out to the tune of £1.3bn a year because of auto-renewals in motor insurance alone – on average that’s a whopping £113 per annum per consumer. The FCA had a real opportunity to be bold and tackle this issue but its measures fall short and consumers are the ones that are going to lose out.
“The frustrating thing is that the FCA’s measures contain the seeds of success. We support, for example, the need to disclose last year’s premium at renewal as well as the targeting of sticky consumers to encourage them to shop around. But ultimately the measures lack teeth and are a piecemeal approach to solving a problem which needs a much more comprehensive set of measures. Most disappointing of all, some of the most potentially effective are merely non-binding guidance, leaving little hope for meaningful adoption by the industry.”
He said the comparison site will be lobbying the government to ensure consumers are informed that when they take out a policy, they are giving permission to be auto-renewed. It will also call for cancelling auto-renewal to be made much easier. “These are just some of the concrete measures we are putting forward. In the meantime, our advice to consumers is don’t get caught out – shop around for a better deal and you could save hundreds of pounds.”