The FSA has abandoned a rule that controls how much insurers charge for policy adjustments
Aggregator uSwitch.com has slammed the FSA for abandoning a rule that controlled how much insurers charged customers for services such as policy amendments.
uSwitch said the regulator’s decision to scrap the rule is resulting in spiralling charges, such as those for motor policy adjustments.
uSwitch insurance expert Ashton Berkhauer said: “Consumers need to know where they stand and the easiest way to do this is for the amount providers charge to be consistent across the industry.
“This would make it clearer for consumers and bring transparency to the market. Currently, making an adjustment to your policy can cost up to £25 and the price for cancelling a policy mid-term can be unlimited.”
The rule was removed with the introduction of the Insurance Conduct of Business Sourcebook (ICOBS), which replaced Insurance Conduct of Business (ICOB) on 6 January.
According to research from Data Thomson Intermedia in February, motorists are being charged an average of £22 for amending simple details on their policies. This amounts to £333m a year from 14 million people requesting changes.
An FSA spokesman admitted the issue kept coming up but said: “When we reviewed the old ICOB, the decision was made not to retain the rule, because we’ve never used the rule or proceeded to take action against a firm for excessive charging.”
He added that any firm that used excessive charges would be in breach of an ICOBS principle which required firms to treat customers fairly (TCF) through principles-based regulation.
The spokesman said the regulator had no plans to reconsider the rule change.
But Berkhauer does not believe TCF will be effective in curbing excessive charges. He said: “I understand that TCF is not trying to rule with an iron fist, but at what point will charges be considered excessive? I’ve not read anything about intervening at a particular point.”