4th December 2015
The City regulator has set out plans to address the auto-renewal of insurance policies by reminding consumers of last year’s premiums in a new quote.
The Financial Conduct Authority (FCA) is worried about the lack of shopping around in the car and home insurance market, with consumers allowing insurance policies to auto-renew even if it’s not the best deal on offer.
In a test of 300,000 customers the FCA found that highlighting the change in cost between old and new policies had the greatest effect in making people shop around and move to a new insurer or negotiating a better deal with their existing provider. Insurance providers will now be required to highlight last year’s premiums when sending a renewal quote to customers.
Christopher Woolar, director of strategy and competition at the FCA, said: ‘We hope the proposals encourage more people to shop around for the best product for them. It is important that insurers give their customers the
information they need to do this and ensure they’re treating their customers fairly.’
MoneySuperMarket insurance expert Kevin Pratt said the new FCA rule was ‘a pivotal moment for the insurance industry and we couldn’t be happier the FCA has decided to address the bad practice of auto-renewals’.
‘It is long overdue; drivers in particular have been suffering from unfair practices for years but now the spotlight is on the providers,’ he said.
‘The current process of auto-renewals in the insurance industry is unclear, unfair and underhand. It takes advantage of customers’ loyalty, resulting in them unknowingly paying more, or even twice, for outdated or unnecessary cover. Customers are signed up to ‘auto-renew’ their policy without consultation, but not afforded the same convenience if they wish to cancel. It is vital consumers have continuity of cover, but that they do so with the right information, choice and notice.’
Analysis by the comparison site found 23% of driver, totaling six million motorists, automatically renewed their car insurance at the last renewal and were stung for an extra £1.3 billion by staying loyal to the same company.