FCA takes aim at industry practices

The Financial Conduct Authority has today published the interim report of its market study into the pricing of home and motor insurance, expressing its concern over the fairness of pricing practices and competition in the market.

The report indicates that six million policyholders may be paying unnecessarily high premiums, and that one in three consumers who paid high prices showed at least one characteristic of vulnerability (such as having low financial resilience or capability). Paying average premiums would have saved these policyholders a total £1.2bn.

It also found that insurers are selling policies at a discount to new customers and increasing premiums when customers renew. Longstanding customers pay more on average, but loyalty is not the only issue: high prices were paid by some consumers who had been with their provider for less than four years.

Executive director of strategy and competition at the FCA, Christopher Woolard said: “This market is not working well for all consumers. While a large number of people shop around, many loyal customers are not getting a good deal. We believe this affects around 6 million consumers.

“We have set out a package of potential remedies to ensure these markets are truly competitive and address the problems we have uncovered. We expect the industry to work with us as we do so.”

Other issues highlighted in the report include:

• The use of ‘price walking’ practices is considered unacceptable by consumers

• People who pay high premiums are less likely to understand insurance or the impact that renewing has on their premium.

• Most firms, when setting a price, include their expectations of whether a customer will switch or pay an increased price. This is not made clear to the customer.

• Firms engage in a range of practices that could make it more difficult for consumers to make informed decisions and could raise barriers to switching.

• Firms earn profits primarily from activities other than underwriting, such as add-ons, premium finance, fees and charges or investment income.

• Many consumers who switch or negotiate their premium could get a better deal.

The report also details potential remedies meant to tackle these of issues, which will include banning or restrictions on many practices in the industry. These actions will focus on tackling high prices for consumers who do not switch or negotiate; addressing practices that could discourage switching; and ensuring firms are more transparent in their dealings with customers.


The FCA is inviting stakeholders to submit their views by answering the following questions. All views will be taken into account in its final market study, due for publication in Q1 2020.

Q1: Do you have views on the interim findings set out in this report?

Q2: Do you have views on the potential remedies we propose to focus on? What are the potential benefits, challenges and unintended consequences that may arise from these?

Q3: Do you have views on the potential remedies that we propose not to focus on? What are the potential benefits, challenges and unintended consequences that may arise from these?

Q4: Do you think there are other remedies that we should be considering? If so, what remedies and how do you think they would address the harm we have identified?

Q5: Are you aware of potential changes or innovations in the home and motor insurance markets that may address the harm we have identified? If so, what are these and how will they address the harm and are there any potential unintended consequences?

Responses should be sent to GIPricingPractices@fca.org.uk by 15 November 2019.

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