FCA attempts to scrap “loyalty penalty” for insurance customers

FCA attempts to scrap “loyalty penalty” for insurance customers

Since 1st January this year, new rules have come into effect, to provide greater protection for loyal and vulnerable home and motor insurance customers.

The new rules, which have been introduced by the FCA, state that any person who renews an existing policy won’t need to pay any more than a brand new customer would. Essentially, customers who tend to remain with the same insurance companies won’t be affected, but for those who like to switch up their providers, it could mean a price hike.

What does the FCA believe?

In reality, many people believe that their insurer will automatically reward loyalty, but the FCA believe that is not what happens in many cases. Not all, I hasten to add! However, the FCA principles of treating customers fairly adds a powerful narrative around customer engagement, hence the need for change.

It is thought that this change will save customers £4.2 billion over ten years. These rule changes follow pressure from Citizens Advice complaints, and are a bid to avoid the phenomenon known as “price walking”.

Matthew Upton, director of policy at Citizens Advice, said: “Rip-off renewal prices have seen consumers paying over the odds for far too long. No longer can you be exploited just for staying loyal.”

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This development means that insurers will be subject to greater scrutiny, increased regulation and will be more mindful of complaints, and will have a wider effect across the regulatory landscape and brokers together with other introducers being mindful of this change.

A failure to adhere to this will not be seen as conduct that treats customers fairly. Consideration of documentation and procedures is therefore key to the conduct of future business.

If you’d like to speak to our experts about any of the information in this article, please don’t hesitate to call us on 03300 945 100.