MANY loyal motor and home insurance customers aren’t getting a good deal, according to the City regulator, which said today that competition wasn’t working well for everyone.
The Financial Conduct Authority (FCA) estimates that around six million policyholders pay unnecessarily high prices. If those customers paid the average amount for their risk, they could save around £1.2bn a year, it said.
Publishing an interim report on its market study into the sector, the FCA set out concerns about how pricing in these markets leads to consumers who don’t switch or negotiate with their provider paying high prices for their insurance.
Christopher Woolard, executive director of strategy and competition at the FCA, said: ‘This market is not working well for all consumers. While a large number of people shop around, many loyal customers are not getting a good deal. We believe this affects around six million consumers.
‘We have set out a package of potential remedies to ensure these markets are truly competitive and address the problems we have uncovered. We expect the industry to work with us as we do so.’
The FCA intends to publish a final report and consultation on remedies that will:
Tackle high premiums for consumers – this could include banning or restricting practices such as raising prices for consumers who renew year-on-year or requiring firms to automatically move consumers to cheaper equivalent deals
Stop practices that could discourage switching – including restricting the way that firms use automatic renewal
Make firms be clear and transparent in their dealings with consumers – including improvements to the way firms communicate with their customers
The report is due out in the first quarter of 2020. The FCA is also considering whether firms should publish information about price differentials between their customers.