Shayne Halfpenny-Ray looks at what the regulator is working on over the summer
As I write this, the sun is shining and the Euro 2020 football championships have begun (be it a year after originally planned), so what better time than now to look at some regulatory activity? Aside from recent headlines about G7, delays to easing restrictions and British sausages, here is a look at some developments.
FCA’s policies to prevent ‘loyalty penalty’
The Financial Conduct Authority (FCA) announced measures to address issues identified in the regulator’s September 2020 market study, which found millions of home and motor insurance customers lose out through repeated renewal with current providers.
Under the new rules, insurers will be required to offer renewing customers a price that is no higher than they would pay as a new customer. The FCA estimates that these measures will save consumers £4.2bn more than 10 years, by removing the loyalty penalty and making the market work better. As this has been a consistent feature of the public trust index, it remains to be seen if this measure will begin to restore trust with those who held this as a core reason for reduced or lack of faith in insurance.
In addition to the new rules on pricing for home and motor insurance, the FCA is also bringing in new rules to:
- Give most consumers easier methods of cancelling the automatic renewal of their policy.
- Require insurance firms to do more to consider how they offer fair value to their customers.
- Require home and motor insurance firms to report data to the FCA so that it can supervise the market more effectively.
The FCA states that it will continue to monitor the market closely to ensure firms are ready to implement the pricing changes on time, and review the effects of the remedies during the course of 2022, ahead of a full evaluation in early 2024.
Consumer duty consultation
Alongside new price-walking powers, the regulator is proposing to introduce a new ‘Consumer Duty’, setting higher expectations for the standard of care firms provide their customers. The Consumer Duty would require firms to:
- Ask themselves what outcomes consumers should be able to expect from their products and services.
- Act to enable rather than hinder these outcomes.
- Assess the effectiveness of their actions.
As these measures are still being consulted on, members can access these proposals and the response form here: https://bit.ly/3zykJkn. The deadline for responses is 31 July 2021.
FSCS levy changes
The Financial Services Compensation Scheme (FSCS) has published its latest outlook, with the headline being that the eye-watering 48% increase on the levy up to £1.04bn for 2021/2022 in its previous forecasts has been reduced to £833m (as it stands).
This is largely due to the expectations of claims and the fact firm failure has not been as proportionally high as the FSCS originally thought, due to the extension of government support to firms and individuals.
While most of this structure applies to investments, there is a considerable part that applies to the general insurance market and brokers specifically. In a positive turn, the total broker contribution has been reduced from £146.8m to £73.8m.
However, it remains to be seen if further charges will come out later in the year, as we look ahead to the 2022/2023 period. As always, the CII will engage with the above issues and keep you updated on
Shayne Halfpenny-Ray is public affairs manager of the CII