Transparency in insurance renewals

On 1 April 2017, new rules come into effect that will increase transparency and engagement at renewal in general insurance markets. These rules and guidance were set out in a recent Policy Statement (PS16/21[1]) and they intend to:

• address concerns about levels of consumer engagement at policy renewal
• improve the treatment of existing consumers by firms
• promote effective competition in the market

The rules[2] apply when a firm (either the insurer or intermediary) sends a general insurance renewal notice to a consumer. Firms will be required to:

• Disclose last year’s premium at each renewal, so that it can be easily compared to the new premium offered.
• Encourage consumers to check their cover and shop around for the best deal at each renewal.
• Identify consumers who have renewed four, or more, consecutive times, and give these consumers an additional prescribed message encouraging them to shop around. This includes consumers who renew after 1 April 2017, who may have already renewed four or more times before these rules come into force.

These rules are intended to encourage consumers to engage with their insurance renewal on both cover and price. Firms are encouraged to, and should feel free to, communicate the benefits of their products and services in addition to the new disclosure requirements, provided it doesn’t attempt to distract consumers.

Our Smarter Consumer Communications[3] initiative should also be considered when introducing changes to comply with these new rules.

Our Handbook also contains guidance[2] on how firms can maintain records to demonstrate compliance, including keeping a record of premiums. In addition, the guidance details the importance of providing appropriate information and issuing clear communications to consumers at renewal.

It also addresses how firms should treat consumers who want to switch or cancel, and the appropriateness of fees or charges for cancelling or renewing policies.

Defining a ‘renewal’

A ‘renewal’ is specifically defined in the new rules. All firms, particularly brokers and intermediaries, should consider this definition carefully when proposing consumers renew or carry forward a policy at the point their current policy expires.

Our new Handbook rule says that ‘renewal’ means carrying forward a policy, at the point of expiry and as a successive or separate operation of the same nature and duration as the policy, with the same insurance intermediary or the same insurer.

The definition of renewal is intended to have a broad application and includes circumstances where the underwriting insurer changes but the intermediary proposing the ‘renewal’ remains the same.

Renewals undertaken by brokers and intermediaries

We believe consumers can benefit from engaging with their renewal across all personal lines general insurance markets and across all distribution channels. While we recognise that many brokers and intermediaries will shop around at each renewal on behalf of their customers, this is not always the case.

Brokers and intermediaries who do shop around can explain their service alongside these new required disclosures, provided that this does not attempt to distract consumers.