Gocompare is warning that new rules designed to make insurance renewal notices more transparent and prompt customers to shop around may not go far enough, and as such may not have the desired effect of a significant increase in the number of consumers who ‘switch and ditch’ expensive policies.
From 1 April 2017, insurers will be compelled to tell policyholders how much they are currently paying for their cover when they send out renewal reminders. However, the new Financial Conduct Authority (FCA) rules* do not prescribe exactly how the information should be laid out. They simply state that it should be clear and accurate and in a prominent place, so that the customer can easily compare the renewal price with the previous year’s premium.
In an attempt to stop longstanding customers paying more for the same cover than new customers do, insurers will be required to identify customers who have renewed with them for four consecutive years. Renewal notices issued to these customers will have to contain an additional prescribed message encouraging them to shop around: “You have been with us a number of years. You may be able to get the insurance cover you want at a better price if you shop around”.
The new rules will apply to general insurance products including car and home insurance and the FCA estimates that the new renewal process will benefit consumers by £64 million to £103 million per year.
Lee Griffin, chief operating officer of Gocompare.com: “Five years with the same provider is too long. There is a real possibility that these customers will be paying too much for the convenience of allowing their insurer to simply roll their policy over, year after year. We’d like to see a renewal process where customers are actively encouraged to shop around EVERY year.