The ABI has written to the Financial Conduct Authority (FCA) proposing an initiative which would force insurers to include in renewal notices how much a customer paid for cover the previous year, therefore showing clearly how the renewal quote compares.
It also wants to include mention of first-year discounts, effectively warning policyholders that the price will be higher at renewal.
The ABI wants the changes to be in place by the end of 2015.
MoneySuperMarket car insurance expert Natasha Glasgow has backed the proposals, but thinks they could be taken further.
Natasha said: “At long last, the insurance industry is waking up to the fact that it has made the process of renewing policies at a competitive price as difficult as possible, with many customers paying way over the odds because they stick with the same insurer year after year.
“Greater transparency is long overdue and we welcome the ABI’s proposals which have resulted from greater scrutiny by the regulator, the Financial Conduct Authority.”
Could go further
But forcing insurers to tell customers how much they paid last year does not go far enough, says Natasha: “Seeing last year’s price on a renewal quote is one step towards getting a good deal – but far from a silver bullet. Car insurance premiums are falling for new customers – as first year deals offer discounts to entice customers in – so comparing across the market will reveal how good a deal your renewal price really is.
“We would like to see these measures go further, and tackle the issue of insurers automatically renewing policies for the second year.
“This practice hinders customer’s abilities to shop around for the best deal. We also hear of some people ending up with two policies running simultaneously, or a policy that no longer offers them the right level of cover.
“Insurers at the very least need to make it much clearer whether customers will have their insurance automatically renewed unless they actively opt out.”
As we found from more than 80 reader comments on our blog Get proof of your no claims discount, proof of no claims is another area which could be clearer.
For example, Don Hanney wrote: “I’ve long been peeved by this insurance-company scam, having lost many years NCD through various companies recognising limited years of claim-free policies. Surely there should be an industry standard.”
Natasha agrees that changes are needed. She said: “Proof of a customer’s No Claims Discount should also be given in the renewal documents. Not having this kind of information readily available can create a real barrier to customers wanting to move to a different insurer because some providers make it very difficult to obtain.”
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