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FCA investigating car insurance pricing practices

Published 31 October 2018

The Financial Conduct Authority (FCA) is investigating car insurance pricing practices, after it emerged that some firms might be inflating renewal prices for long-standing customers.

Home and motor insurance are the most commonly held insurance products in the UK, generating insurers almost £80 billion in premiums every year, with 82 per cent of adults having at least one policy in their name.

>>>Honest John guide to cheap car insurance

A preliminary investigation into the home insurance market by the FCA found differential pricing that may result in some consumers paying significantly higher prices than others. The FCA has said it expects insurance companies to look after the interests of all customers and treat them fairly, whether they are new or long-standing.

Andrew Bailey, the FCA’s chief executive, said: "We want to make sure that general insurance markets deliver competitive and fair prices for all consumers.

"This market study will help us examine the outcomes from general insurance pricing practices and inform how, if necessary, we should intervene to improve the market."

Insurance companies are required, by law, to tell their customers how much they paid for a policy the year before on all renewal letters and emails. In April 2018, The RAC was forced to apologise to more than one million of its insurance customers, after it failed to adhere to the rules.  

The Association of British Insurers (ABI) has admitted that the market is “not working as well as it should for some long-standing customers”.

Hugh Savill, the ABI’s director of regulation, said: “This is an important issue and insurers will work with the FCA to address issues raised in the report to ensure that the market works as well as possible for all consumers.

“While many customers benefit from competitive motor and home insurance markets with lower premiums, we agree that the market is not working as well as it should for some long-standing customers."

The FCA is asking for evidence for its market investigation, with input being welcomed up until 3 December 2018. The results of the study will be published in summer 2019.

Comments

Engineer Andy    on 31 October 2018

Wow! They've only just realised this?

This has been going on for DECADES, and is rife across many 'subscription' or 'contract' style purchases we make such as:

1. Utility providers - Landline phone/ISP, electricity and gas;
2. Mobile Phone providers (including insurance);
3. Insurance of all forms - motor, home building and contents, motor breakdown (especially);
4. Newspaper and magazine subscriptions (including online);
5. Shop services, e.g. dry cleaners, purchasing of regular orders, premium online shopping services;
6. Website memberships;
7. Satellite/cable TV/phone/ISP services.

Firms value new customers far more because most believe that long-standing ones are mugs who you can treat them poorly and, for the most part, get away with it because they can't be asked to change to a competitor, often because they know that competitor's customer service isn't any better, or that changing is a real hassle ([IMHO] e.g. SKY) - whether long, complicated processes, or ones invliving lengths/numerous phonecalls or use of complex web services that not everyone can understand (e.g. many of the elderly).

My parents are in that last group - they haven't even looked into changing ANY of their utility providers since they moved to their home in 1975.

Unless and until we treat firms like the Americans do, which is to demand great products, customer service and reasonable prices otherwise we're off straight awya and will TELL EVERYONE about how rubbish they are in detail, then this sort of thing will continue.

Bicycle_Repair_Man    on 31 October 2018

In other news, the Pope is a Catholic and bears crap in the woods...

Sooty    on 5 November 2018

Are you sure.. I have but seen any three year studies on this :)

P Menzies    on 5 November 2018

Every year check the comparison sites, pick the cheapest and if yours won't match it move. Insurance is like a pig in a poke you will never know how good or bad it is until you claim.

jeremy Taffel    on 11 November 2018

Re using comparison sites - it is difficult to use them for multi-car policies. My advice is, if more than one of you at the address need insurance, look at the providers that do multi-car, and don't rely entirely on the comparison sites.

My wife's policy expires at the same time as mine. We originally had a multi-car policy with Admiral but have been with AXA more recently. This time around the renewal premiums were unacceptable, which gave me the incentive to look around.

The comparison sites, seemed to indicate that AXA were quite competitive but then I went to the LV site and discovered that I could save over £200 with them for the two cars with a multi-car policy. Admiral were not quite so cheap.

Richard Parker    on 5 November 2018

Well thats capitalism for you !

Robert Cross    on 5 November 2018

Insured with LV last renewal price had gone up about £100 from previous year. Checked Compare The Market as new customer found quote for nearly £100 less on LV, phoned company, moaned to sales, got renewal for less than online price. Why do they try it on?

Peter Byrne    on 5 November 2018

My insurance renewal at the end of August came with a very big shock with a premium increase from £331.23 to £538.91. I complained but was told that £538.91 was their best offer. I had the same car, a Mercedes C250 AMG Sport, I hadn't submitted a claim for 20+ years. I am a member of the IAM. Their excuse was that my Wife, an additional driver on my policy as back-up on long journeys if I started to tire, and hasn't driven my car for more than a year, had a minor accident this year with her car being written-off on account of its age and repair costs. So, I went back to to my previous insurer, Mercedes-Benz insurance who offered a premium of £454.49. The Policy Terms are better - in the event of an accident my car will go to a Mercedes workshop for repair and only Mercedes parts used whilst the dumped insurer insists on repair works at their choice of workshop and no promise to use genuine M-B parts. So, a better policy + a saving of £84.42. AND, both insurers use the same company to underwrite their policies !!!!!.

Carole Dunn    on 5 November 2018

I received a renewal for £666.30.
I drive a Dacia Logan(2015). I'm 63 having driven since I was 17 with no claims on both my cover & as a second driver on my partners car & no points on my licence.
I also insure my partner 59 with a clean licence & no claims on both mine & his insurance & my daughter a learner aged 37.
Went on line to see if this price was right putting in all the info off my last renewal of £205 adding the extra year of no claims. Surprise, surprise the amount was over £400less.
I phoned up the company who I was with who told me the amount was correct..
I threatened to leave them, when after being asked to hold they came back to say they were wrong & I could have the insurance at the on-line price. Success I think.

Carole Dunn    on 5 November 2018

I received a renewal for £666.30.
I drive a Dacia Logan(2015). I'm 63 having driven since I was 17 with no claims on both my cover & as a second driver on my partners car & no points on my licence.
I also insure my partner 59 with a clean licence & no claims on both mine & his insurance & my daughter a learner aged 37.
Went on line to see if this price was right putting in all the info off my last renewal of £205 adding the extra year of no claims. Surprise, surprise the amount was over £400less.
I phoned up the company who I was with who told me the amount was correct..
I threatened to leave them, when after being asked to hold they came back to say they were wrong & I could have the insurance at the on-line price. Success I think.

paul robert watson    on 5 November 2018

last year i changed my car,half way through the year,when i asked for
a quote they were very cagey about the cost.Then they said it would be £280 for the four months to the renewal.i got a quote for the year
for £340,this was not the cheapest.my original company were again
cagey about the cancellation cost and i would not get any no claims
discount as it was not a full year.the cancell fee turned out to be £20
which they were very reluctant to divulge.i will not be going back in a
hurry.why can't they be more upfront as they always want us to tell
the truth with the threat of withdrawing cover over any excuse.

Michael T Lepard    on 5 November 2018

I received my renewal notice from Hastings Direct last week, I've not made a claim of any kind for at least 11 years but my insurance cost have risen every year. My old insurer kept putting up my renewal every excessively and went a step to far last, hence moving to Hastings Direct. You can of course guess the next line - after another claim free year they invited me to renew with them by increasing my fee by 21%.
Of course l jumped at such a bargain!!! Yes your right of course, straight to A different provider for less than I paid last test.
Advice if needed is tell them to get stuffed, they don't want loyal customers. They see loyalty as a cash cow

theanalyst    on 5 November 2018

It’s the same problem with broadband providers only more so as BT are involved. If there is a more incompetent company in the world than BT Openreach I have yet to find it. On enquiring about switching my provider to BT (after my current provider raised the rental and would not move) and agreeing a price they then informed me that although fibre is available in my area, there were no free lines at the cabinet. Sky found a free line 10 minutes later at my current rental cost!
I have no doubt that next year I will have to do the comparison dance all over again at renewal time.

Michael T Lepard    on 5 November 2018

I received my renewal notice from Hastings Direct last week, I've not made a claim of any kind for at least 11 years but my insurance cost have risen every year. My old insurer kept putting up my renewal every excessively and went a step to far last, hence moving to Hastings Direct. You can of course guess the next line - after another claim free year they invited me to renew with them by increasing my fee by 21%.
Of course l jumped at such a bargain!!! Yes your right of course, straight to A different provider for less than I paid last test.
Advice if needed is tell them to get stuffed, they don't want loyal customers. They see loyalty as a cash cow

john england    on 5 November 2018

One of the worst offenders in this regard is Saga Insurance. My car and house premiums increase annually way above the level of inflation and every year I have to do battle with them to get the price reduced. They see loyalty as a financial weakness. Don't give in to their greed.

rushman1uk    on 5 November 2018

We've always been shafted, so why not he investigation? I shop around every year, getting the cheapest quote for what level of insurance cover plus extras I need. Then if my current insurance company can't match it, they've lost me as a 'loyal' customer. Luckily for the last 4 yrs, admiral have beaten the lowest quote I've got.

   on 5 November 2018

first of all let me declare an interest...i have none,.zilch,zero and i can swear on oath on that,..with what i am going to say about this particular concept,or company,,i dont know if the insurers will try and blank it out,,.I just don't know,.. i,m watching closely as it could be a game changer for us "punters"...its a site where insurers bid for your business,.if they bid and someone beats that bid they can bid again....now i,ll put the name here but if its removed well thats fair enough, but its not up and running this site just yet, but keep an eye on it.....its called gethoncho . com...take a look and you can make your own mind up...i await for hopefully its inception..

Ubermik    on 5 November 2018

They rely on people being too trusting, busy or lazy to bump up their profits. And the ethics this displays doesn't exactly bode well for how decent the company might be should you ever need to make a claim

Almost every year I get a stupid renewal, often almost twice what it was the year before but almost always at least 50% higher, then when I tell them I am going elsewhere the exact same policy and sometimes with some extras thrown in is now "miraculously" several hundred pounds cheaper, even whilst searching on line for my "new" insurer I will see the exact same companies prices via brokers hundreds of pounds cheaper than my renewal quote

So I make a point of never going with a company which has done this even when their "revised" quote is cheaper than the company I am going to and I make a point of telling them exactly why

So yeah, its pretty obvious they are doing this and have been doing it for years, but they also fill the pockets of politicians with donations each year so its unlikely to ever change to any significant degree other than for show

Robertdear    on 5 November 2018

Insurance companies have been doing this for years, they do not value loyalty - fact just live with it. If you want the best price you have to put the leg work in an trawl the comparison sites.
Just had my renewal from LV, who I regard with high integrity, phoned them up to not renew and immediately offered below their internet quote but it was not below my lowest quote. I have renewed my insurances every year but never with the same insurance company.

A.Ward    on 5 November 2018

I have been driving since I was 17 and now at 84 with NO CLAIMS I am paying "through the nose" for my car insurance. Recently I used a comparison site and got a quote putting my age as 44 and then the same quote at my true age of 84 and the price increased by a stagering £140. This is discrimination and should be outlawed.
A,Ward

Davel Lewis    on 5 November 2018

Apart from insurance cost , there is a more urgent matter to consider . I have been driving on company insurance for the last 40 years or so. Having just sold my business I have now had to search for private insurance . I have found that most insurers I’ve contacted DO NOT cover you to drive to and from work under their standard policy , what’s more when cover is offered to cover work journey it is only a direct trip each way and deviation would/ could invalidate cover. Which makes makes me think how many drivers on SDP(social domestic pleasure) are using their vehicles to travel to work completely unaware of their insurance status? Having just re entered the insurance I’m of the age /eperience to check and recheck before accepting any quote,things like a tow bar constitutes a modification seems ludicrous. So I would advise , Check with your insurance company if you use your car to go to and from work , I wouldn’t like to find out after a incident .

   on 6 November 2018

Hi We now live in France. The Insurance is no better, because there is a huge amount of traffic that uses the main pay routes from the north to the south which are supposed to be of greater risk! So we are all under a penanlty for that.


Most of the French roads are far more quiet that the jolly old UK. Cars are generally 30% more expensive, MOT every 2 years. So some saving. Also MOT's are not carried out by private garages, which really works here and the repair bills are far lower. The pay routes can easily be avoided and the roads generally are in far better condition than anything in the UK. The French are far different from the English, they generally run older cars and are not in the buy a new car to keep up with the Jones's.

We live on a very country lane, just 6 houses and our lane is recovered every year, amazing. Please remember France is a large country with far less density of traffic and generally the speed travelled is lower.

Clive Stacey    on 6 November 2018

My household insurer once jacked up the renewal by over £100. when I complained I was informed it was because of the previous years flooding. I advised them that there had been no flooding the previous year in Essex and in any case my house sits on a hill approximately 243 ft. AMSL. Woolwich Insurance, part of the Barclays group amended the premium.

My car insurer failed to pursue a small claim properly, in spite of having Legal Protection. I had to settle for 50/50. A month later my wife was backed into by a van reversing out into the High Street while she was waiting in the traffic. The same thing happened they failed to deal with the claim properly. She lost her excess and had to have her unblemished vehicle repaired.

Neither she or I continue to be insured by Hastings Direct, or will ever again.

Gosling

kevin neate    on 7 November 2018

The insurance industry is totally corrupt ridden by parasitic middlemen sat in front of their computers creaming off percentages. LV are the worst offenders in my experience and I will never use them again.. The incessant advertising makes the industry stink even more.

kevin neate    on 7 November 2018

The insurance industry is totally corrupt ridden by parasitic middlemen sat in front of their computers creaming off percentages. LV are the worst offenders in my experience and I will never use them again.. The incessant advertising makes the industry stink even more.

Baron210    on 7 November 2018

Wow, switch today and save away. I’d been with my company for 6 years, it had gone ( my premium) from £230.00 to 420.00. In that time, so my next bill, I switched. This was with ( Oh yes) ( can you guess), I went with LV, and happy days, my premium came up as £230.00. So happy again, though going to keep an eye in this for next time. Max NCD discount on a Mercedes E class 3.0 litre diesel.

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