New disclosure rules for insurance renewals

For further information on the new FCA conduct of business rules introduced recently which come into force from 1st April 2017.
Freshfields Bruckhaus Deringer
Bond Dickinson

The introduction of these new FCA requirements was mentioned in a report to the Club's Council meeting on Saturday 11th March 2017 by Peter Best.

For the avoidance of doubt, no part of this NEWS item is formal advice with regard to motor insurance, simply a report of a development due to come into force in a matter of a few weeks as it is surprising it has not received much news coverage.

Posted: 170312
A mandatory change affecting insurance comes into effect from 1st April 2017. From that date all insurers, and presumably brokers too, have to include in communications to their customers concerning the renewal of their insurance cover a statement explaining customers should shop around to ensure they get the best deal.
The Financial Conduct Authority (FCA), the conduct regulator which covers the insurance sector, has been concerned that the way in which insurance policies are priced at renewal may result in poor customer outcomes. Customers may not understand the price they are paying for their renewed policy, and longstanding customers may pay more than new customers for the same product due to this lack of understanding and their inertia when it comes to shopping around at the point of renewal. In December 2015 the FCA published a consultation on new rules and guidance to tackle these issues. Their policy statement contains new rules that will be added to the Insurance: Conduct of Business source book (ICOBS) from 1st April 2017.

Notice to be issued with insurance renewals
Firms proposing to consumer the renewal of cover are now required to encourage consumers to consider shopping around for alternative cover. The firm must provide the information set out below to the consumer in good time before the renewal of the policy.

Presentation of new premium
The firm must provide the proposed premium to be paid on renewal in good time before the renewal of the policy.

Presentation of historic premium information
The firm must also provide either:
> the premium paid by the consumer at the start of the policy; or
> where one or more mid-term changes were made to the policy which the firm proposes to renew, an amount calculated by annualising (or otherwise adjusting as appropriate to the duration of the proposed policy) the premium in effect following the most recent mid-term change, excluding all fees or charges associated with those mid-term changes.

Comparison invitation
The customer must also be provided with a statement
> inviting them to check that the level to be provided by the cover is appropriate for their needs, and
> reminding them that they can compare prices and levels of cover offered by alternative product providers.

Comment
The aim here is to ensure the customer will be aware of the historic premium information so they can compare that with the renewal premium on the papers they receive from the insurer or broker and see the extent of any increase or decrease in the premium payable.

During an item on a BBC R4 programme this week it was said that in the energy market the regulator wants to introduce measures to try and make all energy suppliers offer their cheapest tariffs to all customers and not just to new customers (to attract them) or to existing customers who contact their existing supplier and seriously haggle for a better rate. Analysis suggests the lo
yal customers who do not search for better tariffs are paying higher energy prices and it is that increase in their energy price which is subsidising the discounts offered to new or churning or haggling customers. Clearly that business model regards loyal customers as "stuffees"! It seems the motive behind the insurance "renewal statement" in the new FCA rules above for the insurance sector is based on a similar concerns.

Classic car insurance is specialised sector of the motor insurance market where the scope and quality of the policy is important rather than simply price. Limited mileage and agreed value conditions help reduce the premium payable but other features of the scope of the policy are important with classic car policies - free European cover, breakdown cover in the UK and in Europe and factors like how well the insurer or broker handle claims. Hopefully that experience will be rare if at all but when you need support with a claim then the quality of the support will become a very important feature in the policy. Multi-car policy features are also a feature too where both your daily driver car(s) and your classic car(s) are either covered by one policy or covered by some other beneficial multi-car cover arrangement.

On renewing a classic car insurance cover it's well worth making sure the type of use you put the car to is covered. Many insurers exclude commuting for instance and competitive use as well, although low-key events may be covered by some policies.