New insurance proposals hailed

People renewing their car or home insurance could find it easier to shop around or haggle for a discount under new proposals set out by insurers.

The new scheme could make it easier for consumers to shop around for a better deal
The new scheme could make it easier for consumers to shop around for a better deal

The Association of British Insurers (ABI) said it has written to the City regulator, suggesting that new minimum standards of information should be set across the market.

The standards would mean that renewal documents for motor and home buildings and contents insurance would include the premium that the customer started the year paying alongside their renewal quote, so that they could be compared more easily.

Policy documents for new customers would also need to include a "clear explanation" that any introductory discounts which may have applied to new customers may not apply when the policy is due for renewal.

The ABI said it plans to discuss the proposals it has made to the Financial Conduct Authority (FCA) in more detail.

Huw Evans, deputy director general of the ABI, said: "Insurers want to make renewing your insurance policy easier and clearer to understand by reminding you of last year's premium and flagging up introductory discounts.

"Most of us have home or car insurance and it is important we have the information we need when it comes to renewal."

The ABI said research carried out among over 2,500 people found that nine in 10 (89%) of those who have received an insurance renewal before said they would find it helpful to have the previous year's price printed on their insurance renewal document.

It argued that for all customers to benefit, the proposals need to be implemented across the whole market and to reflect the fact that customers arrange their motor and home cover in different ways, for example directly from an insurer, through an insurance broker or from their bank.

The ABI said this can only be done by the regulator and it would need major system changes by the many different providers in the market so it would be better to take a "holistic approach".

The ABI hopes the proposals can be successfully put in place by December next year.

Consumer group Which? has been pressing for insurance companies to provide last year's premium alongside the renewal quote and explain any differences.

Its "we don't want to pay a premium" campaign has attracted nearly 30,000 signatures since it was launched in February.

Which? executive director, Richard Lloyd, said: "The Association of British Insurers's proposed reforms would be a victory for the 30,000 people who signed our campaign calling on insurers to show customers the premium they paid last year.

"These simple changes could save people money by prompting them to shop around or haggle for a discount, and we urge the Financial Conduct Authority to adopt the proposals."

The FCA has already been looking into how the way in which information is presented in renewal letters can prompt consumers to make more effective choices. It has been working with some firms to run a series of modified renewal letters, to see what impact they could potentially have.

An FCA spokeswoman said: "We welcome the ABI's contribution to the debate on helping consumers make better decisions at renewal time.

"We already have various pieces of work under way in this area and will continue to work with the industry as this develops.

"We will report back on our work in 2015 but we would encourage firms to develop innovative solutions that will benefit consumers in the meantime."