Briefing: Why the FCA renewal rules are causing such a stir

My 78-year-old mum got her car insurance through. It was was £2,000. She’d been with the same broker for 15 years. When I urged her to push for a better deal or leave the broker, they shaved off 40%.

These are the type of people the FCA and consumer bodies want better deals for - elderly people less likely to shop around and losing out on the best deals.

This week, Citizens Advice want as far as saying they are being exploited, following their own research on home insurance. 

The FCA believes it can tackle the problem through brokers and insurers showing last year’s price against the new price at renewal time. 

Despite the rules being introduced in April, the FCA is ‘concerned’ that firms are not fully implementing the rules. 

Privately, some brokers and insurers are also concerned - but for different reasons. 

It’s my understanding speaking to contacts, that analysis carried out by some of the more sophisticated insurers and brokers, shows renewal transparency is going to have a signficant impact on customer behaviour. 

For example, customers who were once expected to have a four-year policy lifecycle are going to have a much shorter policy lifespan. 

That has a knock-on effect on pricing. Whereas once you could increase - frequently signficantly -  the renewal price, that’s not so easy if there is the threat of losing your customer. 

So it’s possibly no wonder some insurers and brokers are so reluctant to be as transparent as possible when showing the old and new price. 

That’s another more prosaic explanation as to why the implementation has not been so good, and that is because of the poor software and systems of providers. 

Finally, perhaps there’s also a reluctance to commit to the rules because of a differing viewpoint. Many in insurance, especially the brokers, feel that shopping around is not good for building trust between the customer and their company.

‘Good’ brokers will fight for the best deal for their customers and partner insurers will comply. 

It’s a topic of much discussion, but at the end of the day, the FCA had little choice but to implement the rules. Nobody wants price regulation and although not perfect, renewal transparency is a better option for the insurance industry. 

The ABI have backed the initiative. Like it or not, it’s here to stay - so firms should start pulling their finger out and making sure their customer paperwork and customer online documentation is fit for purpose. 

Content director, Saxon East