The Financial Conduct Authority (FCA) has published a scathing report on home insurers’ pricing practices – highlighting serious concerns about whether consumers are being fairly treated.
As a preliminary step to a broader insurance investigation, the government watchdog has reviewed the approaches to pricing and storage of customer data of 18 home insurance firms, representing around 40% of the UK home insurance market.
The FCA reported three key areas presenting ‘the most potential for significant harm and poor outcomes for consumers.’ These were:
* Problems caused by ‘differential’ or ‘dual’ pricing – the practice of charging customers with the same or very similar risk characteristics different prices for the same product. One example of this is charging new customers different rates to existing ones. The FCA’s research found some groups of consumers pay significantly higher prices than other groups with similar risks and costs.
* Firms failing to have appropriate and effective strategies, governance, control and oversight of their pricing practices and activities, such that they are unable to reliably assess and evidence whether they are treating their customers fairly.
* The risk of discriminating against consumers through using rating factors in pricing
based (directly or indirectly) on data (including third party data) relating to or derived
from protected characteristics.
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