General Insurance Pricing Practices (GIPP) (4)

YOUR COMPLIANCE MATTERS:         General Insurance Pricing Practices (GIPP) (4)

 

Relevance:                 All firms.

 

Action required:       1) Understand the new rules relating to auto renewal of policies

2) Liaise with your software provider to ensure that you will have systems in place to enable compliance with the new rules

 

 

The FCA policy statement on General Insurance Pricing Practices (PS 20/19) was published at the end of May 2021.

 

One of the changes applicable for Consumer customers only (customers buying cover not related to their trade business or profession) is the need to give the Consumer a right to opt out of any auto-renewal process which may otherwise apply. The following Rule changes come into force on 01.01.2022.

 

·        As mentioned above, these rules do not apply to Commercial customers.

 

·        The FCA has also chosen not to apply them to Private Health, Medical Insurance or Pet Insurance (given the risks associated with the customer failing to renew).

 

·        The requirement only applies to policies with a policy period of 10 months or more (therefore monthly renewable policies are not captured by the revised rules).

 

However, for all other Consumer policies, in good time before the conclusion of the contract, the firm must:

 

·        Inform the Consumer whether the policy is set to auto renew;

 

·        Provide the Consumer with an explanation of the impact of the automatic renewal for them; and

 

·        Provide the Consumer with confirmation that they have a right to cancel the auto renewal process at any time.

 

The Consumer needs to be made aware of:

 

·        The existence of the right to cancel auto renewal;

 

·        The conditions for exercising it;

 

·        The consequences of exercising it; and

 

·        Practical instructions for doing so.

 

As always, this must be confirmed in writing to the Consumer (Email is acceptable).

 

 

Renewals

 

When the renewal is invited, the customer needs to be made aware of whether the policy will automatically renew, if they take no action, or whether they need to do something to accept the renewal offer.

 

 

Cancellation Methods for Auto Renewal

 

The firm is obliged to provide easy and accessible methods for cancelling automatic renewal and cannot charge customers a mid-term adjustment fee for changing between automatic renewal and the opt out choice.

 

In terms of the methods of communicating a choice to opt out, these must, as a minimum, include the methods by which the customer was able to take out the policy (whether by telephone, online, etc.).

 

The firm must not put any unnecessary barriers in the way of the customer exercising the right to opt out of auto renewal; this includes not having unreasonably longer call wait times to cancel the auto renewal feature than to purchase the new policy, or unnecessary questioning before auto renewal is cancelled.

 

The customer has the right to opt out of auto renewal at any time, whether this be during the purchase process, during the policy period or prior to renewal.

 

 

Actions Required

 

Firms will need to review their scripts, standard new business confirmation letters, renewal invitation letters, client terms of business, etc. in order to make clear whether a policy is subject to automatic renewal and the ways in which the client can opt out of this, if they wish to do so.

 

You will also need to ensure that your software system has the facility to record whether a client has opted out of auto renewal, so that you can provide the correct renewal letter and follow the correct procedure at renewal time.

 

As always, if you need any help with implementing the revised Rules, please get in touch.