FCA General Insurance pricing practices
What it means for NFU Mutual customers.
To protect loyal insurance customers, the Financial Conduct Authority (FCA) implemented new General Insurance Pricing Practices across the whole UK insurance industry in January 2022.
Unlike many other insurers, NFU Mutual rewards loyal customers for renewing their General Insurance policies with us. We do this through a Mutual Bonus scheme, which for over 20 years, has provided our customers with a saving on the renewal premium of their General Insurance policy.
In 2021, we paid out £250m in Mutual Bonus to our loyal customers and we expect to provide significant savings again this year.
We therefore welcome these new Pricing Practices, as they align with our values of providing customers with the insurance cover they need at a fair price and with a first-class service.
What are the new General Insurance Pricing Practices?
- No insurance company will be able to charge a renewing home or car insurance customer more than they would have had that customer been a new one buying through the same channel
- Customers will be able to easily opt out of auto-renewal
- All products must provide fair value to customers
- Insurers must report pricing data to the FCA so they can monitor that the new rules are being followed.
Which NFU Mutual products do the Pricing Practices relate to?
- Home and Lifestyle Insurance
- Bespoke Home Insurance
- Home and Lifestyle Plus insurance (closed to new business)
- Car Insurance
- Motorcycle Insurance
- Light Goods Vehicle Insurance (sold to consumers)
- Agricultural Vehicle Insurance (sold to consumers)
- Special vehicles (sold to consumers)
- Horseboxes (sold to consumers)
When did the changes come into place?
The main changes that affect customers came into place in January 2022, although some product governance changes came into place in September 2021.
Will my price change in 2022 as a result?
Whilst we are doing everything we can to minimise disruption to existing customers, in order to implement the FCA reforms fully there have been some changes to our pricing structure which could mean prices rise or fall at renewal for some customers. We will send renewal documents to you at least three weeks before your renewal date so you are aware of any changes.
Does this mean my price will never go up again?
There are a number of different factors that affect the price of insurance, whether that is for a new customer or one renewing their policy. Some of these we have little or no control over, such as weather events.
Inflation of costs associated with paying claims and operating an insurance business means prices can naturally increase each year. During periods of high inflation, the costs associated with paying claims and operating an insurance business increase significantly.
Where possible, we do our best to mitigate external factors which impact premium prices, such as taking measures to minimise the impact of fraud.
Other factors that affect the price of insurance include your age, where you live, the car you drive or the size of your house, annual mileage, where a car is parked, and your claims history.
However, it is not just your claims history that affects individual renewal prices. The basic concept of insurance is that the losses of a few are paid for by the contribution of many. This means that premiums collected must cover all the losses that year, in addition to the operating costs of our business. If lots of people claim on their general insurance the pot must go further, which means prices increase for everyone.
These Pricing Practices will stop insurers from offering discounts to new customers before recouping that loss by aggressively increasing premiums each year, a change NFU Mutual supports as we have a long and proud history of rewarding loyalty.
I have a question about my price – who should I contact?
Our renewal letters to customers include a clear summary of the most important information for them to consider. We set out the price paid for the previous year next to the renewal price, for ease of reference. We will be happy to provide more information regarding any aspect of the renewal upon request, and the relevant contact details are set out in the letter.
Can customers opt out of auto-renewal at NFU Mutual?
You can already opt in or opt out of auto-renewal when you purchase a policy or renew. Following these changes, you will also be able to opt out of auto-renewal at any time during the policy.
We believe that automatic renewal not only provides convenience to our customers but also helps them to avoid becoming accidentally uninsured. Our renewal letters are sent out well in advance of the renewal date to enable customers to change their mind and to cancel their renewal.