On 31 October 2018, the FCA published the results of a thematic review on the pricing practices of household insurance firms. The review uncovered a number of issues on pricing practices. As a consequence, the FCA announced a number of next steps:
- conducting a market study on general insurance pricing practices;
- Publishing a discussion paper on fairness of pricing in financial services;
- Conducting an evaluation of previous actions by the FCA on general insurance pricing;
- Addressing conduct by firms.
With the publication of the thematic review, the FCA also published the terms of reference of the Market Study. MS18/1 will focus on retail home and motor insurance. The purpose of the market study is to deepen the FCA’s understanding of the following:
- Consumer outcomes from pricing practices;
- Fairness of pricing practices;
- Impact of pricing practices on competition.
The parties in scope will include those selling or providing insurance directly to consumers, intermediaries and digital comparison tools.
The FCA aim to publish an interim market study report in summer 2019, setting out preliminary conclusions and any potential remedies. The final market study report and, where relevant, a consultation on proposed remedies will be published by the end of 2019.
Supporting the Market Study, the FCA also published Discussion Paper DP18/9, which focuses on price discrimination, ie firms charging different prices to different consumers based solely on differences in consumers’ price sensitivity, and on loyalty or inertia pricing, ie firms charging existing customers higher prices than new customers.
Finally, the FCA also published a ‘Dear CEO’ letter to general insurance firms, setting out expectations on firms’ pricing practicing, following the findings of the thematic review.
Views and evidence on MS18/1 are requested by 3 December, and on the questions in DP18/9 by 31 January 219.