September 22, 2020
By Huw Jones and Carolyn Cohn
LONDON (Reuters) – Britain’s Financial Conduct Authority said on Tuesday it was proposing to stop insurers from charging repeat car and home insurance customers more than new clients.
Insurers’ treatment of customers is under increasing regulatory scrutiny, adding to pressures on their bottom lines as they deal with costly claims caused by COVID-19.
The latest move comes just a week after the FCA successfully brought a test case over business interruption insurance.
The regulator said that when a customer renews their home or motor insurance policy they should pay no more than if they were new to their provider through the same sales channel.
“The FCA estimates that its proposals will save consumers 3.7 billion pounds ($4.73 billion) over 10 years,” said Christopher Woolard, the FCA’s interim chief executive.
It singled out “price walking” or complex pricing practices that allow insurers to raise prices for consumers who renew their car and home insurance policies year after year.
Consumer champion Citizens Advice said it was pleased the FCA was taking “strong action to crack down on this systemic scam”.
The aim is to stop loyal customers being penalised, the FCA said on Tuesday, identifying 6 million policyholders paying high or very high margins in 2018, who could have saved 1.2 billion pounds.
The FCA is also proposing rules requiring insurers to consider how they offer fair value to customers over the longer term, and to report data to the watchdog so that it can check the new rules are being followed.
The proposals are being put out to public consultation until January, with final rules published next year.
The FTSE 350 non-life insurance index <.FTNMX8530> fell 3.5%.
Insurers were also due by Tuesday to tell small business customers the implications of last week’s ruling that some of them were wrong to reject tens of thousands of claims from firms battered by the COVID-19 pandemic.
(Reporting by Huw Jones; Editing by Kirsten Donovan)