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Regulator introduces new requirements for renewals invited from 1st April 2017
The FCA's new rules are designed to increase transparency and reduce consumer inertia in relation to insurance renewals. As such these only apply to retail customers (although firms may apply them to commercial clients too if they so wish) and for policies that have a term of 10 -12 months.
The rules will only apply to firms who invite renewal themselves rather than leaving this to the insurer or any other broker in the chain.
A summary of the new requirements are as follows:
·When firms invite renewal, either by letter or email, then they will need to provide the 'renewal' premium either from the existing insurer or new provider if a change is recommended. If offering a non advised service then it may be appropriate to provide this year and last year's renewal from the current insurer PLUS details of any cheaper/better cover found with an alternative (the client will need to decide). Figure must be presented in a way that allows easy comparison to last year's insurance premium, or if there has been a mid term adjustment affecting the premium, the equivalent annual premium if that change had been in place at the start of the policy term. To prevent confusion firms should also make it clear if an adjustment has affected the 'previous' premium otherwise this may cause queries. If there are any add-on/optional extras products then these should be included within the 'premium'. No fees should be included in these figures.
·For 1st-3rd renewals (including cases where the client has changed insurer but remained with the firm as a broker) then immediately following or alongside the premiums a statement must be displayed reminding the client that they should check that the cover offered still meets their needs AND consider if they wish to shop around to compare prices and levels of cover. The FCA's suggested wording for this is "‘Have you checked that your insurance cover still meets your needs? Have you considered shopping round to find the best deal for the cover you want?"
·From the 4th renewal (i.e.inviting for year 5) onward firms MUST use the following prescribed 'shopping around' statement with no alterations or amendments allowed “You have been with us for a number of years. You may be able to get the insurance cover you want at a better price if you shop around." Firms should also include a statement about checking cover still meets their needs, although that wording isn't prescribed.
·All of the above information needs to be presented in a way that makes it clear to the client that it is key information so firms may want to use bold text, boxes or other means to signify this.
·Firms must also need to keep a record of premiums to show compliance with the new rules, so as a minimum firms should make sure the details are held on the client's file or a separate database if preferred.