Auto-renewal may have a bad rep, but it’s there to make sure people do not go without cover, the aggregator says 

GoCompare has called for action to reduce the impact of the loyalty penalty for customers, offering a five-point plan on auto-renewals.

The aggregator has been involved in the FCA consultation on this subject matter. Its chief executive and one of the firm’s founders, Lee Griffin, said that he welcomes the FCA’s update and the news that the regulator intends to publish a final report and consultation on remedies for the home and motor insurance markets within the first three months of 2020.

Griffin highlighted that while these changes cannot solve all the problems caused by loyalty pricing in the insurance market, they could make a significant difference for millions of customers.

“For real, long-term reform, we need to look to harness the benefits of innovation and, as a tech company, we will continue to work with the FCA and others on the possibilities offered by initiatives such as Open Finance. But, in the short to medium-term, we need simple, achievable actions and improving the auto-renewal process further would be a huge step,” he said.

This follows the FCA’s super compliant update on the work it is undertaking to tackle the loyalty penalty, as well as other issues raised by Citizens Advice super-compliant to the Competition and Markets Authority (CMA) in 2018.

Five-point plan to improve insurance renewals

  1. Introduce a new 28-day cooling-off period for auto-renewals, rather than the current 14 days. During this extended period, the insurer should be required to take all reasonable steps to ensure that the customer is aware that they have been auto renewed.
  2. Increase communication during this period, using a wider range of methods, including email, SMS and push notifications.
  3. Cancellation fees should be limited, if not banned completely, for customers who switch away during this extended auto-renewal cooling-off period.
  4. Action should be taken to ensure firms are much more transparent in their dealings with customers who auto-renew. This should apply at the first instance of auto-renewal, but even more so from year two onwards. People who have auto-renewed several times are at risk not only of paying more than they should be, but also of being on a policy that is no longer the best fit for their current needs.
  5. The requirement for more transparency should also apply to all customer touchpoints – from insurers’ websites to key facts, policy wording and other documentation. There should also be a standard for transparency and the use of plain English.

Further insight

Griffin continued: “In our dealings with the FCA, we have provided further insight into the problem of loyalty pricing and the barriers to greater switching and suggested a series of remedies to help tackle the problem.

“It will be almost 18 months since the super-complaint by the time we have a final report and then there will be a further consultation, so in the meantime, the only option is to continue encouraging people to take responsibility for switching and saving.”

Reform

But, for GoCompare “the quickest way to improve the situation for millions of general insurance customers is to reform the renewals process.”

“While auto-renewal has a bad reputation, it is there to ensure people aren’t left without cover or inadvertently break the law. However, the renewal process should be reformed immediately and standardised to ensure that insurers treat customers more fairly,” he added.

Within this, Griffins mentioned that “protecting vulnerable customers may only be achieved with a greater level of intervention, but that could take longer to agree”.

GoCompare is a comparison website that was originally launched in 2006; it claims to be the first comparison site to focus on displaying policy details rather than just prices. It is a Biba member and regulated by the FCA.

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