The regulator has confirmed the amended timetable to ensure firms can ‘plan their change programmes effectively’, however the CII believes ‘this may not be enough time for firms to get all practices in place’
The FCA has today confirmed that general insurance firms operating in the home and motor insurance markets will have until the end of 2021 to fully implement proposed pricing changes, rather than the initially suggested four-month turnaround period.
Following feedback to the regulator’s recent consultation on proposed measures to tackle price walking – where long-standing customers are offered a less competitive renewal price than new customers – the FCA has announced a new implementation timetable, which will be effective once the regulator has published its policy statement at the end of May.
The policy statement will detail the final rules that the FCA wishes to introduce. The amended implementation timetable following this is:
- Firms will have until the end of September 2021 to accommodate the systems and controls (SYSC) rules and product governance rules.
- Firms will have until the end of 2021 to implement the pricing and auto-renewal remedies, as well as reporting requirements.
The FCA said it received 100 responses to its consultation, which closed on 25 January 2021.
Effective change programme
The FCA’s consultation followed the publication of its General Insurance pricing practices market study report last September. This outlined the practice of price walking, also known as dual pricing or the loyalty penalty, and recommended a number of measures to eliminate its use in the home and motor insurance markets.
Although the FCA is still conferring on the detail of the rules to be implemented, today’s early announcement is to enable firms to “plan their change programmes effectively”.
The regulator said: “We received over 100 responses to the consultation, which closed on 25 January 2021. Many respondents commented on the proposed implementation period, with almost all firms saying that it would not be possible for them to meet this timetable.
“Firms told us that the package of remedies on which we consulted would require significant operational and business-wide changes. These include developing and testing new pricing models and re-coding IT systems.
“These changes cannot be delivered in a short period, while firms are working under significant pressure dealing with the impacts of the coronavirus pandemic.
“We have not yet reached a final decision on the details of any rules we might introduce, but we are making this announcement now so firms can plan their change programmes effectively.”
Taking action
Alongside providing new implementation deadlines, the FCA has also emphasised that firms must implement the required changes on or before the revised dates and that it will “closely monitor how firms implement their change programmes and will be checking their progress regularly”.
It added: “We do not want to see consumer harm continue into 2022 and have a range of tools and powers available to us.
“We will consider taking action against firms where there is evidence that they have not taken sufficient steps to implement the rules by the implementation date, including action to ensure they take appropriate steps to repair any harm that arises, especially financial loss to consumers.
“The pricing rules would apply to renewal notices sent after the rules take effect (rather than to policies renewing after the rules take effect).
“As renewal notices are sent some time before policies renew, this means firms have the full implementation period to make the necessary changes to their business models.”
Enough time?
The Chartered Insurance Institute’s director of policy and public affairs Matthew Connell still thinks the revised timetable may not be long enough for a successful implementation.
He said: “We believe the FCA have given adequate sight and consultation of their proposals. They rightly recognise the hard work which will be involved in firms implementing finalised proposals and the subsequent changes which will need to be made.
“While we welcome their ambition for full implantation to take place by the end of the year, there is some concern that this may not be enough time for firms to get all practices in place.
“It’s important that the regulator continues to take the current pandemic into account and remains flexible in their approach, to ensure we get the right consumer outcomes.”
Ian Hughes, chief executive of insurance data insight business Consumer Intelligence, added: “This isn’t much of an extension. The FCA has confirmed that almost all 100 firms that responded to its consultation said it would not be possible for them to meet a four-month implementation timetable for all the measures in its general insurance pricing practices consultation - but is today effectively saying that firms have to be ready to implement its rules on product governance and fair value four months after it publishes the rules.
“Firms will have seven months to address final dual pricing rules, but the work on fair value should not be underestimated. It includes all parts of the distribution chain including insurers, brokers, price comparison websites, add-ons, premium finance and all personal lines products.
“Today’s update is a fairly clear indication of the direction of travel and warning to start preparing now. In a recent poll, we found that 50% of firms were focusing mainly on pricing. Those priorities may need to shift.”
In February, the ABI’s director general Huw Evans described the four-month implementation period proposed by the FCA for insurers to action its price walking remedies as “a joke”.
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