Watchdog investigates insurers over renewal 'overcharging'
- 6 July 2013
- From the section UK
The City regulator has launched an investigation into insurance companies for overcharging customers when they renew their house and car policies.
The Financial Conduct Authority (FCA) says that automatic renewal can lead to customers being treated unfairly.
BBC Radio 4's Money Box revealed in March that loyal customers often pay much more than new ones for insurance.
The insurance industry says consumers can shop around for the best prices in a competitive market.
But many customers use automatic renewal for home and car cover - with the premium often increasing every year.
One 83-year-old Money Box listener saw the cost of her home insurance rise to £850, when a similar policy was available to new customers for £200.
Chairman of the Commons Treasury Committee Andrew Tyrie wrote to the FCA's new chief executive Martin Wheatley and the director general of the Association of British Insurers Otto Thoresen following the Money Box report in March.
In his letter, Mr Tyrie raised concerns that older people in particular could suffer because they are less likely to shop around for the best deals using the internet.
'Excessively high rates'
He wrote: "Such practices appear to penalise long-term loyalty and are to the detriment of those less able to access price comparison resources, particularly the elderly."
In a response on 28 March, Mr Wheatley confirmed the watchdog is investigating whether insurers take advantage of customers who do not shop around.
He wrote: "We will look at issues like premium charging in a new light.
"In particular we will be interested in whether firms are taking advantage of consumers who simply accept what they are offered."
In reply to the committee, Mr Thoresen made reference to the "excessively high" renewal rates highlighted by the Money Box report.
He wrote that "extreme differences" between automatic renewal prices and those charged to new customers were unusual, although varied pricing aimed at attracting new business was to be expected.
In a statement released on Friday, Mr Tyrie said: "The previous regulatory regime failed to protect consumers. It must do better this time around.
"The FCA...can do a lot to help consumers, especially vulnerable consumers.
"If people are given a more meaningful choice, they are less likely to be ripped off.
"The Committee will scrutinise closely the information gathered by the FCA."