On 1 April 2017, the Financial Conduct Authority’s (FCA) new rules and guidance on improving customer engagement at renewal came into effect.
The rules proposed by the FCA in its consultation paper published in December 2015, required firms to:
- Disclose the previous year’s premium at renewal.
- Include text to encourage consumers to check their cover and shop around for the best deal at each renewal.
- Identify consumers who have renewed with them four consecutive times and give these consumers additional messages that encouraged them to shop around.
These changes, which will affect insurers, insurance intermediaries and consumers in the retail general insurance market, are aimed at removing barriers to consumers shopping around for an insurance product that meets their needs, ensuring that consumers are treated fairly and that communications are clear, fair and not misleading in keeping with the FCA’s Principles for Business.
Disclosure of previous year’s premium
Firms will now have to disclose last year’s premium on renewal notices to allow for easy comparison with the quoted renewal premium. Other information such as the end of introductory discounts can be included but not to the extent that it obscures the disclosure.
Encouraging consumers to shop around
At each renewal, firms will be expected to have a message included in renewal notices which encourages consumers to shop around for the best price and to check their cover. The FCA is keen to stress that the messages should not focus on consumers getting the best price for their insurance product but rather there should be a balance between price and meeting the customers’ needs.
Consumers who renew on a consecutive basis
For those consumers who renew with an insurer on four or more consecutive occasions, firms will now have to include the following prescribed additional ‘shopping around’ message, at the consumer’s fourth consecutive renewal: “You have been with us for a number of years. You may be able to get the insurance cover you want at a better price if you shop around”.
This disclosure will not be required if there is a break in the chain of consecutive renewal.
The Association of British Insurers has been pressing for change since 2014 and so these changes will be welcomed. Consumers already know how to shop around to get the best price possible but it will be interesting to see whether this new level of transparency gives them greater confidence to ensure they are getting the right insurance product for their needs at a competitive price.