Home and motor insurance firms’ pricing practices probed by City regulator

PA

The City regulator is investigating how fair insurance firms are being when charging customers for home and motor cover.

The Financial Conduct Authority (FCA) said the market study into firms’ pricing practices will give it a deeper understanding of the scale of any harm to consumers and who it affects.

If necessary, the FCA will intervene to improve the market.

The regulator has concerns that some pricing practices could potentially disadvantage some consumers significantly, in particular the most vulnerable and least resilient consumers.

Practices it is concerned about include “loyalty pricing” where existing customers may be charged higher prices than new customers; as well as firms potentially charging different prices to different consumers based solely on how “price sensitive” customers are.

FCA chief executive Andrew Bailey said: “Our initial work has identified a number of areas of potential consumer harm. We want to make sure that general insurance markets deliver competitive and fair prices for all consumers.

“This market study will help us examine the outcomes from general insurance pricing practices and inform how, if necessary, we should intervene to improve the market.

“If change is needed to make the market work well for consumers, we will consider all possible remedies to achieve this.”

The regulator said it expects firms to look after the interests of all customers and treat them fairly, whether they are new or long-standing, and has written to chief executives of firms about its expectations.

It has also identified potential non-compliance by some firms with its rules on transparency when policies come up for renewal.

The FCA said that, where it has concerns about conduct by firms, it will explore all options to address this using the full range of its powers.

The regulator said general insurance plays a key part in the UK economy, generating more than £78 billion in premiums for UK insurers.

It said home and motor insurance are the most commonly held general insurance products in the UK, with some 82% of adults having one or more general insurance products.

The FCA aims to publish a final report and, where required, consultation on proposed remedies by the end of 2019.

In May, insurers and brokers launched a new plan to help tackle excessive premium differences between long-standing and new customers.

Hugh Savill, director of regulation at the Association of British Insurers (ABI), said: “While many customers benefit from competitive motor and home insurance markets, we recognise that the market is not working as well as it should for some long-standing customers.

“To try and address this, we were the first sector to launch an industry-wide initiative to tackle excessive price differences between new and existing customers earlier this year, and the FCA has welcomed this.

“This is an important issue and the industry will work with the FCA to ensure that the market works as well as possible for consumers.”