By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants. The Money Matters column appears in the Pembrokeshire Herald, the Carmarthenshire Herald and the Llanelli Herald newspapers.
Britain’s markets watchdog is launching a study into how insurers charge for home and motor coverage – amid concerns that costs can be higher for long-standing customers than new ones.
The Financial Conduct Authority (FCA) said last week that the terms of reference for the market study would be published in a few weeks.
“The general insurance market study we have announced will help us examine the issues we have already identified in the market in more detail,” FCA Chief Executive Andrew Bailey said.
He was referring to concerns about higher prices for existing customers who renew their policies each year.
The watchdog has powers to change how markets operate in order to increase competition and ensure customers are treated fairly.
Past market studies have also led to enforcement action.
The Association of British Insurers (ABI), an industry body, said that earlier this year it became the first sector to take voluntary action to ensure that long-standing customers don’t lose out.
“This includes commitments from firms to review premiums charged to customers who have been with them for five years, and the industry publishing a report on progress within two years,” said Huw Evans, director general of the ABI.
“In a competitive free market, where three out of four people shop around, there is no easy fix available and these measures will take time to bed in.”
Meanwhile, telecoms and financial services companies face an investigation by Britain’s competition regulator after consumer body Citizens Advice complained that customers who do not switch providers were being “ripped off”.
Such customers were being overcharged 4.1 billion pounds a year, the charity said last week when it asked the Competition and Markets Authority (CMA) to tackle the issue.
“The practice of overcharging loyal customers is widespread and Citizens Advice has repeatedly warned that loyal consumers are being ripped off,” its Chief Executive Gillian Guy said.
Citizens Advice submitted a so-called super complaint, which the government defines as raising “any feature, or combination of features” of a market for goods or services which “appears to be significantly harming the interests of consumers”.
The CMA said it would consider the concerns raised and what should be done about them.
This will include engagement with relevant regulators such as the Financial Conduct Authority (FCA) and Ofcom. It will publish a response within 90 days.
The competition regulator said possible outcomes included recommendations to change legislation, action by sectoral regulators and competition or consumer enforcement action.
Citizens Advice said its research had found that eight in 10 people were paying a significantly higher price, in at least one of the markets, for remaining with their existing supplier.
“As a result of this super-complaint, the CMA should come up with concrete measures to end this systematic scam,” Guy said.
The FCA said it was also looking at the savings and mortgages market.
UK Finance, which represents banks, said the industry has already made changes to improve competition in mortgages and savings markets, including helping longstanding borrowers switch to a better deal.
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