FCA calls time on dual pricing

The Financial Services Authority is proposing to ban insurers charging existing customers more than new policyholders in a crackdown on the motor and home markets.

The announcement was part of the FCA’s final report into the pricing of home and motor insurance.

The watchdog is proposing significant reform of these markets through measures which seek to enhance competition, ensure consumers will receive fair value, and increase trust in these markets.

The FCA identified 6 million policyholders were paying high or very high margins in 2018. If they paid the average for their risk, they would have saved £1.2bn. Some of this is due to harmful pricing practices, which the FCA’s proposals aim to tackle.

Other proposals include enhancing product governance rules, enhanced reporting and making it easier for customers to opt out of automatic policy renewals.

Christopher Woolard, interim chief executive of the FCA, commented: “We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in future, and put an end to the very high prices paid by some long-standing customers. The package would also ensure that firms focus on providing fair value to all their customers.”

The FCA estimates that its proposals will save consumers £3.7bn over 10 years. It is seeking views on its proposals by 25th January 2021. It will consider all the feedback and intends to publish a policy statement and new rules next year along with its response to the consultation feedback.

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