The FCA has today published a further interim report on its market study into home and motor insurance pricing.
It makes stark reading. Amongst the findings are:
- Insurers often sell policies at a discount to new customers and increase premiums when customers renew, targeting increases at those less likely to switch.
- 1 in 3 consumers who paid high premiums showed at least one characteristic of vulnerability.
- 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 to raise barriers to switching.
The above findings appear to be very inconsistent with the FCA's principles, in particular the obligation to treat your customers fairly. It will be interesting to see if this results in any enforcement actions against firms, or indeed senior managers and whether the FCA require any firms to undertake a past business review - that could prove very expensive given the scale of the problem identified - 6 million policyholders.
It certainly appears that the (unnamed) firms involved fall way short on the FCA's 'culture test'. Read this speech by the FCA and ask yourself what scrutiny the boards of the relevant insurers exercised in relation to these pricing practices?
FCA sets out potential remedies to tackle concerns about general insurance pricing