The trade body has written to the FCA, asking for new regulation around insurance renewals
The ABI has called on the FCA to introduce regulation to improve transparency around dual pricing.
In a letter to FCA chief executive Martin Wheatley, ABI director general Otto Thoresen has asked the regulator to introduce regulation requiring all renewal documentation for motor and home insurance to include the premium that the customer started the year paying alongside the renewal quote.
The ABI has also proposed that the FCA regulate that policy documents for new customers include a clear explanation that any introductory discounts which may have applied to new customers may not apply when the policy is due for renewal.
ABI policy adviser Mark Shepherd said the request for new regulation was made so that insurers would not be disadvantaged if they moved to improve transparency without support from the rest of the insurance industry.
“We are asking that they regulate [these proposals] so it can be implemented across the market,” he said. “The reason for that is the ABI is a trade body for the insurance industry, but only around 35% of general insurance is done directly through insurers, so we have intermediaries, brokers, price comparison websites and banks all issuing renewal correspondence. So, in order for this to apply in a fair and consistent way we are proposing a regulatory initiative.”
The stance was backed by Ageas UK chief executive Andy Watson.
“We agree that documentation should be transparent on pricing and discounts applied so that customers are able to understand annual changes in their premiums,” he said. “However, as a market we must move as one and at the same time in order to achieve real customer benefit, and this proposal highlights the need for insurers, brokers and other suppliers to work together to implement any change.”
And despite welcoming the proposals, LV= Broker personal lines director Michael Lawrence said more work was needed to make the proposals suitable for brokers.
“There are added complications for the broker market, such as brokers’ charges, fees and commissions,” he said. “More work needs to be done around the implementation if customers are to derive any benefits from the proposal.”
The move comes after a YouGov survey of 2,586 UK adults commissioned by the ABI revealed that 89% of consumers would find having their previous premium included in renewal documentation useful.
Furthermore, only 65% of consumers surveyed said they were aware that first year premiums may include an introductory discount, leaving almost a third unaware of the practice.
ABI deputy director general Huw Evans said the proposed measures would help improve consumer understanding of insurance.
“Insurers want to make renewing your insurance policy easier and clearer to understand by reminding you of last year’s premium and flagging up introductory discounts,” he said. “Most of us have home or car insurance and it is important we have the information we need when it comes to renewal.”
“Our proposal, if adopted by the FCA across the market, would significantly improve transparency for millions of customers,” he added.