The FCA said it is addressing concerns that consumers pay higher prices if they stay with one insurer, particularly for a long period of time, it said.
"The FCA has found evidence of low levels of consumer engagement, switching, and a lack of competition when some types of insurance policies are renewed," it said.
In 2014, the FCA ran a trial with over 300,000 consumers to test reactions to different types of information provided at renewal and whether this prompted people to switch. The inclusion of last year’s premium on renewal notices had the greatest impact, prompting between 11% and 18% of people to either switch provider or negotiate a lower premium when prices sharply increase, the FCA said.
The trial also looked at simplified renewal notices that reinforce key messages about the right to cancel and switch, at including 'shopping around' information leaflets with renewal letters, and at reminders through other media such as email, letter and text message.
As a result of the trial, the FCA proposes that last year's premium be published on renewal notices, and that insurers should be asked to identify and specifically prompt customers who have renewed the same product four times or more, to remind them of the benefits of shopping around.
The FCA also proposes providing information to, and communicating with, insurers. This includes guidance on providing information to consumers on auto-renewal mechanisms.
The initial suggestion for the inclusion of the previous year's premium came from the Association of British Insurers (ABI), which wrote to the FCA in July.
Financial services regulation expert David Heffron of Pinsent Masons, the law firm behind out-Law.com said: "The FCA’s proposal, as suggested by the ABI, for insurers to quote last year’s premium provides a partial solution to this long-known issue. This additional information is helpful to consumers and creates a level playing field for insurers, something insurers have been concerned about."
"While helpful, this is not a 'silver bullet' in resolving the challenges insurers face in developing their pricing strategy. The consultation paper reminds insurers of their obligation to treat customers fairly and their approach to pricing, including the use of introductory discounts, still needs to be considered in the context of ensuring the delivery of fair customer outcomes," Heffron said.
Feedback can be made on the FCA proposal until 4 March.