FCA General Insurance Pricing Practices – amendments

August 2021


In May 2021 the FCA published its Policy Statement PS 21/5 on General Insurance Pricing Practices. Following the publication issues were raised by various stakeholders which has resulted in the FCA issuing a further Policy Statement which includes various amendments and clarifications as mentioned below.  Alongside this most recent Policy Statement (see this FCA web page for information about PS21/11 the FCA has also published a set of Q&As.

The notable changes made by the FCA within this new policy statement are:

To clarify the application of some of the rules to firms that give discounts or other incentives to customers

To clarify the application of the reporting rules to intermediaries that rebate commission

To amend the definition of a ‘renewal’.  This will alter the way in which pricing and reporting rules apply to firms

PS 21/5 introduced a broader definition of “renewal”. Following interaction with stakeholders the FCA now views that definition as potentially problematic. Within the new definition the FCA has clarified that:

  1. Where an existing customer actively buys a policy with the same firm through a different channel or distribution arrangement firms should treat this as new business rather than renewal business.  This is a key development.
  2. However, where firms actively move a customer to another channel, distribution arrangement or to a different policy (of a similar type – e.g., re-broking at renewal) at the lapsing or expiry of an existing policy then they should continue to treat these as ‘renewals’ for the purposes of the pricing and reporting rules.

 

To clarify the operation of the transitional rules

The auto‑renewal rules come into effect on 1 January 2022 with transitional provisions in relation to the disclosure elements extended until 17th January 2021.  Where a firm takes advantage of the transitional provisions, it must provide the relevant disclosures for policies entered into during the transitional period.  Firms must take this action in relation to communications made during the transitional period that do not comply with the disclosure rules. The rules as currently drafted are unclear about whether this includes policies that have not been entered into during this period, e.g., where renewal notices sent out during the transitional period are for policies which have renewal dates outside it.  The FCA is therefore amending the rules to make clear that, where a firm uses the transitional provision, it must take retrospective action to provide the required disclosures for all communications made during the transitional period that do not comply with the disclosure rules in the new ICOBS 6.2.6 R and ICOBS 6.5.1 R, irrespective of when the contract concludes.

We will be issuing further Hot TopICS in relation to the pricing remedies, which will take into account these amendments and clarifications.  In the meantime, firms should assess their business models, identify where they may be deemed to be price-setting intermediaries for motor and home insurance, and to give some consideration as to whether they have been (even unintentionally) price-walking customers.  Where firms will need to complete information in the required reporting, they will need to start to collect the data from the beginning of next year.


Back to news...