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ABI responds to Which campaign on fees and charges in financial products

Responding to the launch of a campaign by Which? on fees and charges on financial products, the ABI highlights the regulatory requirements which firms must follow on their disclosure in insurance policies.

Hugh SavillHugh Savill, the ABI’s Director of Regulation, said:

"Insurers are not interested in hiding any charges from their customers, and follow regulatory requirements so that any additional charges are clearly set out. Insurers have also recently written to the regulator asking for reforms to ensure more customer-friendly information on renewal pricing.

"The motor insurance market is very competitive, with the average private motor insurance premium having fallen by 14% since the start of 2012. Insurers agree that it is important customers are fully aware of any administration and cancellation charges when comparing premiums and the cover offered by providers, and this is a responsibility for all those who sell insurance, including comparison websites, and brokers as well as the insurers themselves."

In response to the actions Which? is calling on firms to take as part of its ‘Stop Sneaky Fees and Charges’ campaign, the ABI commented:

Action: Don’t hide the full cost from customers

ABI: Insurers, intermediaries and price comparison websites are required by the industry regulator, The Financial Conduct Authority (FCA), to clearly set out to the customer before  and after the contract is agreed, in addition to the premium, other charges that could arise such as administration costs for policy alterations and cancellation charges. 

Action: Stop making it hard to compare prices

ABI: While the FCA requires disclosure of any additional insurance charges that could arise, not all firms will have the same cost structures, which is why any charges where applied, will vary between firms. While some firms may not charge administration fees, others may incorporate them into the overall premium, while others may only apply them when they are actually incurred. Regardless, they are under an obligation to clearly disclose these fees both before and after the contract is concluded.

The ABI wants to make it easier for motorists to be able to shop around for the best insurance deal. This is why we have recently proposed to and will be discussing with the FCA an initiative that would help improve transparency for millions of customers. This would ensure that all motor and home renewal documents include the premium that the customer started the year paying alongside the renewal quote for easy comparison. As part of this proposal, we also have also suggested that policy documentation should make it clear that any introductory discounts for new customers may not apply at renewal.

Action: Stop stinging customers with rip-off additional charges

ABI: Firms must highlight the existence of any fees both before and after the contract is concluded. Changes in your circumstances, for example changing jobs or moving home, may require the insurer to reassess the risk, and if any change the need to prepare and issue new insurance documents. If you cancel early then the insurer needs to re coup the costs involved in setting up the policy.

Last updated 01/07/2016