FCA to Tackle ‘Price Walking’ in Insurance Industry
The Financial Conduct Authority (FCA) says it intends to save consumers £4.2bn over the next 10 years as part of its bid to tackle ‘price walking’.
The policy statement announced by the FCA - set for implementation in January 2022 - will see a ban on new insurance customers receiving cheaper deals than those existing customers seeking a renewal.
“Firms would be free to set new business prices, but they would be prevented from gradually increasing the renewal price to consumers over time (known as ‘price walking’) other than in line with changes in customers’ risk,” explained the FCA press release.
The same release identified six million policyholders who were paying high or very high margins in 2018.
“We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in the future, and put an end to the very high prices paid by some long-standing customers,” commented Christopher Woolard, Interim Chief Executive of the FCA.
“The package would also ensure that firms focus on providing fair value to all their customers.”
Set to affect the motor and home insurance markets, the impact could be profound, according to Urban Jungle Chief Executive Jimmy Williams.
“Price walking is completely systemic in the insurance industry and it is unethical. A customer should not be enticed in with low rates, only to see them hiked up at a later date. But many firms are doing precisely that, so we welcome the FCA’s decision to ban it.”
Director of Regulation at the ABI, Charlotte Clark, called for industry-wide coverage when it comes to the new regulations, taking into account price comparison sites too.
She told the Insurance Times; “It is vital that the new rules are applied across the whole insurance market, including price comparison websites and insurance brokers, with a uniform level of supervision and monitoring by the FCA, to ensure good customer outcomes.”
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