UK regulators force auto insurance overhaul
(Bloomberg) --The U.K. markets regulator plans to overhaul the way insurers price home and car coverage in a bid to save consumers 3.7 billion pounds ($4.7 billion) over 10 years.
The Financial Conduct Authority said it’s concerned these markets are “not working well for consumers,” according to a statement on Tuesday. The proposed rule changes would ensure that when people renew their policies they pay no more than new customers buying coverage for the first time. It would also be easier for clients to stop automatic renewal of their policies.
Providers of home and car coverage fell after the FCA issued its proposals, which Morgan Stanley analyst Jonathan Denham said were tougher than expected. AA Plc declined as much as 5.6% in London on Tuesday morning, while Direct Line Insurance Group Plc fell as much as 5.4% and Admiral Group Plc dropped about 2%.
In addition to the decline in home and car insurers, Beazley Plc plunged as much as 15.5% after doubling its estimate of first-party Covid-19 claims to $340 million after compensation from its reinsurers. Most of the increase was caused by event-cancellation losses, the firm said in a statement.
Home and car insurers use “complex and opaque pricing practices” and target increases on clients who are less likely to switch insurers, according to the FCA. The regulator found in a study that 6 million policyholders were paying “high or very high margins” in 2018, and would have saved 1.2 billion pounds if they’d paid the average price for their risk.
The proposals would “put an end to the very high prices paid by some long-standing customers,” interim FCA Chief Executive Officer Christopher Woolard said in the statement.
The FCA seeks public feedback on its proposals by Jan. 25, and plans to publish new rules next year.