'Scorecards' launched for consumers to compare deals on insurance products

Updated

Some insurance products are to receive "scorecards" in a scheme aimed at making it easier for consumers to compare deals and boost competition between firms.

The Financial Conduct Authority (FCA) plans to launch a pilot scheme, which would show how often consumers are likely to make a claim on a particular general insurance product as well as the likelihood of a claim being accepted and the average payout.

The general insurance market includes home, motor, travel, private medical, extended warranty, mobile phone, legal expenses and pet insurance.

Some of these products are likely to be included in the pilot scheme, although it is not yet known which will.

The FCA plans to publish data it has collected from firms in an "easily accessible" format on its website. Bodies such as consumer groups will be able to use the information to compare both products and firms.

The pilot scheme will launch in summer 2016 and it will run for around 12 months. The results will be used to inform any consultation on the use of such measures, the FCA said.

The move follows a report in July 2014, in which the FCA had looked into the general insurance "add-ons" market and found competition was not working well for many consumers.

Add-on insurance can be bolted on to major purchases such as buying a car or taking out home insurance.

The FCA previously found there was little competitive pressure on firms because consumers buying add-on insurance products were less likely to shop around and were less price-aware than they would be when choosing a stand-alone product.

In June 2015, the regulator proposed a range of options for publishing product information, including the scorecard option.

Christopher Woolard, director of strategy and competition at the FCA, said: "We believe that publishing a range of information will help to boost competition between firms, encouraging them to focus on improving the value and performance of their products, whilst giving stakeholders and consumers more insight into the value they offer."

In January, the Association of British Insurers (ABI) published figures showing that around one in every five home insurance claims made by consumers is turned down - while just one in every 100 motor insurance claims is unsuccessful.

Common reasons for home insurance claims failing include claims being made for normal wear and tear or for damage caused by a lack of maintenance which was not insurable; the value of the claim being less than the policy excess; or that the customer had not bought the right kind of cover, the ABI said previously.

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