Out-Law News 2 min. read

Insurance industry to tackle higher premiums at renewal


The UK insurance industry has pledged to act to ensure that long-standing customers are not unfairly penalised at renewal compared to new customers.

Trade bodies representing insurers and brokers have teamed up to develop a set of 'guiding principles and action points' (2-page / 41KB PDF) to help tackle excessive premium differences between long standing and new customers. These include making it clearer to new customers that subsequent premiums may be higher, and proactively reviewing pricing for customers who have been with them for longer than five years.

Customers can still expect to pay more for the second or subsequent years of a policy, as insurers tend to offer cheaper prices or even sell the first year of a policy at a loss in order to attract new customers. However, the principles will ensure that those customers who do not regularly shop around are not unfairly penalised.

One of the commitments is that the ethos and approach to better outcomes for long-standing customers will be given board or senior management level priority and be formally incorporated into firms' procedures for determining customer premiums at renewal. The bodies also hope that the Financial Conduct Authority (FCA) will take the guiding principles into account when supervising firms' pricing practices.

"Insurers do a great job for their customers, providing peace of mind and financial help when they most need it, but the renewal market simply doesn't work where loyal customers get charged much more than new customers," said ABI chair Andy Briggs.

"Given many consumers expect to get cheaper insurance when they shop around, there is no easy solution. These new guiding principles and action points are a positive initiative by the ABI and BIBA members to demonstrate that the whole industry recognise this is an important issue that needs to be addressed," he said.

The new principles will apply to policies of 10 months or longer across many of the main personal insurance products, including home, motor and travel. They will not apply to pet or health insurance, as these products may provide cover at renewal for medical conditions that arose since the inception of the policy which would not generally be covered under a new policy.

The ABI and BIBA intend to publish a report in two years time setting out how their members have sought to tackle excessive differences between premiums for new customers and premiums at renewal. They "fully expect to start seeing an improvement in the outcome for long-standing customers", they said.

New FCA rules came into force last April requiring insurers to provide customers with additional information at renewal. They must now clearly display the total premium paid by the customer the previous year alongside their proposed renewal premium, as well as explicitly prompting customers who have renewed the same product for four years running to shop around. The FCA has recently warned firms that do not comply with the new rules that they risk enforcement action.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.