The latest from the FCA for you;
In our consultation on general insurance pricing practices, CP20/19, we proposed that firms would have 4 months to implement any rules that we might make. Following feedback, we propose to amend this timetable to give until the end of September 2021 for the systems and controls rules and the product governance rules and until the end of 2021 for the pricing, auto-renewal and reporting requirements. In reaching this decision, we have sought to balance ensuring firms have sufficient time to put the changes into effect and acting quickly to address consumer harm.
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.
We will publish the policy statement, and any rules we make, at the end of May. The implementation period will start from this point.
If any rules are made, we propose to give firms an implementation period of until:
- the end of September 2021 for the systems and controls (SYSC) rules and product governance rules (in Annexes B and D of the draft Instrument on which we consulted) and
- the end of 2021 for the pricing and auto-renewal remedies and the reporting requirements (in Annexes C and E of the draft Instrument).
We expect firms to implement any rules that we introduce on or before the proposed deadlines. We will check they are on track and are moving promptly to implement any final rules. To that end, we will closely monitor how firms implement their change programmes and will be checking their progress regularly.
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.
COMMENT FROM CUVVA;
Freddy Macnamara, CEO of Cuvva, commented, “FCA’s remedies are seriously needed to ensure fairer outcomes for customers. What the measures mean for consumers in the short-term, is a potential increase in premiums on price comparison websites to level out premiums at renewal time. In the long run, people will see fairer outcomes as consumers have a more realistic understanding of the cost of their premiums over time, while promoting loyalty and healthier competition.
“Over the years price comparison websites have controlled pricing in the insurance market, pushing prices so low they’ve become unsustainable, which in turn leads to insurers bumping up prices at renewal to compensate for the initial low premiums set.
“Dual pricing has created an industry that demotes customer loyalty as comparison websites rely on people switching annually.”
PEGASYSTEMS
Tony Tarquini, Director of Insurance EMEA, Pegasystems, offers this view;
“Insurance companies are being restrained by the fact they are still working in the traditional world of policy, using their monolithic Policy Admin Systems to deliver these types of changes. The problems trying to be addressed by the FCA are customer-based issues. However, it is very difficult to work on customer-centric issue when IT systems are designed to work from the policy view and which engage with customers as policy segments, rather than individual people.
“Furthermore, the traditional IT development projects around these Policy Admin and other types of systems are still being hardcoded in Java and old programming languages which make any changes very slow. Compounding these aforementioned issues is that insurers are currently running very low on manpower. COVID-19 has seen a headcount reduction, as companies have tried to reduce costs, and diverted staff away into other rapid response projects. To remedy these challenges, no-code or low-code configurable systems should be used to significantly increase the speed of delivery of these types of mandatory changes insurers face.
“Future requirements to update pricing models will only increase and become a standard part of business as usual, so insurers will have to get used to doing this regularly and efficiently. But having the right technology available that can help them build for change will make insurers more resilient and agile going forward.”
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