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Changes have been brought in by the Financial Conduct Authority that will impact the price of insurance in the UK. Find out what the changes may mean to you.
What do the changes to the General insurance pricing practices mean for you?
In recent months you may have seen or heard about changes brought in by the financial services regulator (Financial Conduct Authority - FCA) that will impact the price of insurance in the UK.
Here’s what you need to know about the FCA’s Fair Pricing initiative.
After undertaking an investigation into the pricing and value of insurance products sold in the UK, the FCA recently introduced new rules for insurance providers.
These new rules are designed to ensure providers give fair value to their customers, and that customer loyalty is not penalised - especially when customers renew their insurance policy with their current provider.
This is because many insurance providers offered introductory deals to attract new customers, whilst existing customers were often faced with a more expensive quote when they came to renew, than they would get if they were a new customer. Essentially, existing customers were being ‘punished’ for being loyal. This practice became known as ‘price-walking’.
To protect insurance customers, the FCA decreed that from 1 January 2022, insurance providers must offer the same price for the same policy to both new and existing customers - essentially banning ‘price walking’. These rules currently apply to property and motor policies, which includes policies covering motorhomes and caravans.
Some insurance providers may not have been penalising the loyalty of their customers and therefore won’t have had to make changes to become compliant. However, others may have to increase their new business prices to match their renewal prices, or even reduce the renewal prices to match the new business ones.
As such, we would expect to see prices levelling out across the industry, which would mean new customers will pay the same as existing customers for like-for-like protection.
This doesn't mean the price of insurance will come down though, especially given the impact of much higher than ‘normal’ inflation across the UK economy, and the knock-on impact that it is having on parts and labour costs.
How an individual insurance provider responds to their competitors will also have an impact on how prices move and in what direction. Early industry reports show some big fluctuations in ‘new business’ pricing, which suggests that we might see similar shifts in renewal pricing later this year.
While Caravan Cover is the Club’s own discretionary mutual product and as such isn’t directly regulated by the FCA, we’re pleased to be able to reassure our members that our new business and renewal pricing for Caravan Cover is completely aligned, and we ensure adherence to the regulation even where it is not an actual requirement for this product.
In addition, Devitt Insurance Services - our broker partner for Motorhome, Campervan, Car, Home and Motorbike insurance - has worked throughout last year with the various insurers underwriting these products to ensure they comply with the rules and intention of the FCA changes.
As a Club, we have found it reassuring that very few changes were needed to be made by us or our partners and we hope you are reassured too. We always encourage our members to check their cover, to ensure that their provider and policy is meeting their needs. If you need any help or guidance, please don't hesitate to contact us.