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FCA must balance impact of new pricing rules on consumers

Commenting on the Financial Conduct Authority’s (FCA) finalised rules on General Insurance Pricing Practices, John Taylor, Immediate Past President at the Institute and Faculty of Actuaries, said:

“It is vitally important that the home and motor insurance markets work well and deliver fair value to consumers. Mitigating harm to those currently penalised by price walking should lead to fairer premiums for loyal customers. The new FCA rules should also result in less switching or ‘churn’ and lower frictional costs which could benefit consumers.   

“There is an expectation that the pricing remedies should see lower premiums through increased competition and a rebalancing of the market but the impact may be limited in practice. Potentially the remedies could have the opposite effect, or lead to some firms leaving the market. It is crucial that the FCA’s future assessment properly considers the impact of these changes on competitiveness for home and motor insurance.

“We support the principle of removing unreasonable barriers to consumers on exiting insurance auto-renewal. However, auto-renewal does give policyholders some assurance they will not accidentally find themselves uninsured. The FCA will need to carefully consider balancing the removal of barriers with the risk of consumers inadvertently being left without insurance.”