Insurance companies could be forced to offer clearer information, following growing calls demanding change from a substantial array of consumer groups.
Generally, consumers are tempted into switching or embarking on an insurance policy through a promotional deal offering them a discounted rate for a finite time period.
However, consumer groups have rallied and accused insurers of not presenting policy-holders with accurate figures from which to make prudent decisions, instead withholding price rises and other instances of significant change.
The city regulator has responded in kind by drawing up a new framework of regulations which will ensure renewal quotes include previous premiums as well. This measure will allow policy-holders to see the price fluctuations in their bill and calculate how much theyíve saved or lost.
Proposed by the Association of British Insurers, the move will appease many consumers who feel theyíve been hoodwinked by their insurance company. Since the bodyís referral of insurance companies’ conduct to the FCA much support has been received, with notable money-saving association, Which?, leading the outcry.
If adopted, the new rules would cover all policyholders, regardless of whether they purchase their cover from a broker or an insurer, their bank or a price comparison website. The ABI also propose the revamping of renewal documents for motor & home-related matters. The Insurance Association want last yearís premium printed, alongside the new renewal quote, for purposes of ‘easy comparison’.
However, the ABIís demands are not all-encompassing, stating that it only wants rules applied to home and motor policies. Policies taken out on domestic pets, foreign travel or any other commercial purposes ought to be initially excluded, according to the Insurance Association.
An alternative proposal being considered is to compel insurance companies to explain their introductory discounts on premiums with a greater degree of veracity.
For instance, in many cases customers are lured onto an insurance policy scheme because of a seemingly cheap deal. However, following the completion of a single cost-effective year, the same consumers are charged a far less lucrative sum ñ whatís worse, the majority are blissfully unaware.
It is hoped that the implementation of the measures suggested in the alternate proposal will remedy this issue by forcing insurance companies to inform their customers about the costs they will be faced with when their initial promotional deal comes to an end.
The Association of British Insurers have praised the provisional initiative and given their support for its instigation, saying:
ìInsurers want to make renewing your insurance policy easier and clearer to understand by reminding you of last year’s premium and flagging up introductory discounts,” said Huw Evans, the ABI’s deputy director general.î
A spokeswoman for the ABI suggested the idea should also fuel competition within the industry, which would organically drive down prices, as more consumers would be actively engaging with their insurance companies and thus, switching on a more regular basis.
It is thought the FCA will be enforcing similar rules to the ones imposed on banks in Aprilís Mortgage Market Review, whereby lenders were spurred to be more up front about alterations to saving rates. If transparency is the end goal, then this seems a wise option.
Following completion, the new rules will be enacted by the end of next year.