General Insurance Consultation Paper

December saw the publication of CP15/41: Increasing transparency and engagement at renewal in general insurance markets.

The Consultation Paper can be accessed here

The paper sets out the FCA’s proposals to introduce new rules and guidance for firms and the steps they should take when renewing general insurance policies. The proposals are an attempt to address concerns about a relative lack of consumer engagement at renewal, and the lack of competition that results from this. This can lead to consumers simply defaulting to renew products that are no longer suitable or do not represent good value.

The FCA is proposing:

  • Rules that require firms to disclose last year’s premium on renewal notices;
  • Rules that require additional disclosure when customers have renewed the same product four times or more;
  • Guidance on how firms can improve their processes around renewals;
  • Guidance about records that firms maintain to demonstrate compliance, including a record of premiums.

The measures are intended to apply to retail customers (consumers) and the regulator is aiming for an implementation date of 1st January 2017.

As part of the consultation process, the FCA has highlighted two other specific publications:

  • Occasional Paper No.12: Encouraging consumers to act at renewal: Evidence from field trials in the home and motor insurance markets, which can be accessed here
  • Discussion Paper DP15/5: Smarter consumer communications, which can be accessed here

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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Our View

The regulator obviously has concerns that consumers are not consistently achieving positive outcomes from the renewal process. There is a suspicion that many firms simply go through the motions at renewal. In other words, the FCA feels that firms are not treating their clients fairly when it comes to the renewal of policies, particularly with long-standing clients.

There is a clear sense the regulator wants to take steps to encourage customers to ‘shop around’ at renewal, as it regards this as the best way to ensure consumers end up with a positive outcome. Of course, this represents both a threat and an opportunity for firms.

We would regard many of the proposals contained in the consultation as examples of commercial best practice, designed to help firms retain existing clients and bring on board customers from elsewhere who do decide to shop around.

We will, of course, provide further comment and guidance once the resultant Policy Statement is published, sometime mid-2016.

Action Required By You

In the course of our regular dealings with our general insurance firms, we see many examples of clear communication efforts to consumers at renewal time. However, we would encourage any firm to familiarise itself with the consultation paper content and measure its existing approach to renewals against the proposed rules and guidance. A number of key measures should be considered:

  • Are client communications at renewal clear, fair and not misleading?
  • Do clients genuinely engage in the renewal process and make better informed decisions?
  • Does the customer’s cover remain good value?
  • Does the customer’s cover continue to represent good value?
  • Do you, the broker, have a defined renewal process including guidance as to when and how often a policy is re-brokered or compared to the market?

Remember, most general insurance contracts are annually renewable; therefore, the same ICOBS rules apply for every renewed policy because it is effectively a new contract (establishing demands and needs, D&N statement, etc).

As the regulator is aiming to have any new rules and guidance in place by January 2017, it would be sensible for general insurance firms to include any such exercise within their compliance monitoring programme for this year. Also, be aware that insurers are likely to be taking actions in response to the consultation paper.

As with many of the FCA’s consultations, there is an opportunity for firms to explicitly demonstrate their commitment to Treating Customers Fairly and to be seen to deliver the standards and outcomes expected by the regulator.

ATEB clients should speak with their account manager as necessary; otherwise contact ATEB here to find out how we can help.

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About the Author

Steve is an ATEB Director and has a deep understanding of all matter regulatory, built up over his 30 years + in the industry. With a training background and a technical brain, he overseas numerous complex projects and client implementation work.

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