Regulator reveals its pricing ban powers ‘which could definitely happen’ amid shocking pricing behaviours unmasked at top insurers
The FCA has revealed exactly how it could impose direct pricing restrictions - ‘which could definitely happen’ - in a landmark document just released.
The shocking state of insurers, and intermediaries, failure to take action on dual pricing and its threat to groups was unmaksed in a just-released FCA investigation into 18 insurers.
The damning probe found major insurers putting profits before people in which they blatantly ignored regulation and exploited customer groups, including some of the most vulnerable in society like the elderly and mentally declining.
And now, in what was previously a taboo subject, the FCA is openly discussing its weaponry to finally put a stop to insurers pricing discrimination.
Details of bans
The two ways are:
- A relative price cap: (sometimes called a price collar), which could impose limits on the differences in prices firms charge to new and long-standing consumer groups.
- A price discrimination ban: This would either stop (complete ban) or reduce (partial ban) any pricing differences between consumers based on how many times they renew with the same provider. Partial bans are a less restrictive option that allow firms some price variation for new customers (eg teaser rates).
The FCA says in ’Fair Pricing in Financial Services’: ”The most direct way we could intervene to prevent price discrimination is by restricting the way firms set the prices of their products.
”Some pricing such as insurance is complex and could affect how effectively we could develop and enforce direct price regulation.
”We would need to consider how we can separate price discrimination from cost-based pricing (which is based on the different risks consumers have).
”We also need to think carefully about what the likely response from the market would be if we put restrictions on prices, eg some prices to consumers could go up.”
The FCA also says its other remedies include things such as product design restrictions.
Compliance expert Branko Bjelobaba says the direct pricing restrictions ‘could definitely happen’ if the FCA continues to find poor behaviour.