New FCA Rules - Pricing, Governance and Value
The FCA has published the long-awaited policy statement General insurance pricing practices market study – Feedback to CP20/19 and final rules (PS21/5). These wide-ranging rules address what has been described as the ‘loyalty penalty’ paid by existing general insurance product customers and aim to ensure that customers receive fair value in the insurance products they buy.
The rules introduce a package of market remedies which include:-
- A requirement that when a firm offers a renewal price to a customer it can be no greater than the equivalent new business price for a new customer;
- Additional product governance rules that require firms to have processes in place to deliver products that offer fair value to customers with these new processes applying to all general insurance products and this will include onerous considerations in respect of distribution and remuneration arrangements;
- Rules to enable firms to offer accessible and easy options for customers wishing to cancel auto-renewal;
- Detailed reporting requirements to support the ongoing supervision of the home and motor insurance markets (to include reporting by intermediaries on premium finance and fees/charges that are levied).
The rules relating to systems and controls, product governance and premium finance come into effect on 1 October 2021. The rules on pricing, auto‑renewal and reporting will come into effect on 1 January 2022, with a transitional provision (until 17 January) for the rules on pricing and auto‑renewal disclosure.
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