The Association of British Insurers (ABI) has written to the Financial Conduct Authority (FCA) to propose new standards to improve the clarity of insurance renewal quotes.
The body, which represents the majority of UK insurers, has suggested that renewal letters should include the premium paid for a policy the year before, alongside the new cost of renewing the policy, to make comparison easier.
And it’s also recommended new customers should be given details of any introductory discount that may have been applied, with a clear explanation that these may not apply when the policy is due for renewal.
At the moment insurers don’t have to provide these details, which means policy holders might not have all the information they need at renewal time. Many can't remember what they originally paid or assume the policy will remain affordable.
The ABI wants this new minimum standard to initially encompass all private motor and home insurance policies as these are the most common types of cover taken out and renewed each year.
Under pressure
Last month in a speech at the General Insurance conference in London, Christopher Woolard, Director of Policy, Risk and Research at the FCA, said the watchdog was looking closely at renewal letters.
He said the body had done significant research into how renewal letters influence decision making and was holding a series of random trials of modified renewal letters, the results of which it would report on next year.
[SPOTLIGHT]Woolard concluded that moving towards more effective competition isn’t easy and while sometimes the regulator would need to use formal powers, the industry should try to collaborate with new ideas on the changes.
The ABI says the policy it’s come up with, if adopted, could significantly improve transparency for millions of customers and stimulate competition, as it should encourage more people to shop around and switch.
Response to proposals
Insurers have come out in support of the proposals.
LV said it welcomed the idea of developing industry standards, but a common approach would be needed for it to work, as many factors can impact an insurance premium throughout the year like making a claim or moving house.
Consumer champions Which? also supported the proposals. Which? executive director, Richard Lloyd, said: “These simple changes could save people money by prompting them to shop around or haggle for a discount, and we urge the Financial Conduct Authority to adopt the proposals.”
Meanwhile the FCA was positive about the ABI’s suggestions, but wouldn't confirm whether they would be implemented.
A spokeswoman said: “We welcome the ABI’s contribution to the debate on helping consumers make better decisions at renewal time. We already have various pieces of work underway in this area and will continue to work with the industry as this develops. We will report back on our work in 2015, but we would encourage firms to develop innovative solutions that will benefit consumers in the meantime.”
Would clearer information on your renewal letter encourage you to shop around for a new policy? Let us know your thoughts in the comment box below.
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