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FCA will not enter 'extended dialogue' with insurers about pricing remedies

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FCA will not enter 'extended dialogue' with insurers about pricing remedies

The U.K. Financial Conduct Authority will be talking to insurers "very actively" about its proposed remedies for pricing inequality in home and motor cover, but will not engage in lengthy discussions with the industry.

Speaking to journalists about the Oct. 4 interim report on the FCA's market study of U.K. general insurance pricing practices, Christopher Woolard, executive director of strategy and competition, said insurers could "short-circuit" FCA intervention by coming forward with voluntary proposals. The regulator would welcome such proposals and listen "very carefully" to them.

But he also warned that there would not be an "extended dialogue" between the industry and the FCA on the matter.

"Remedies are inevitable," he said. "Whether those are remedies imposed through FCA rules and the mechanisms around FCA rules is to some extent up to the industry."

The industry has until Nov. 15 to submit responses to the FCA's interim report. The regulator plans to publish its final report, along with a consultation on any proposed remedies, in the first quarter of 2020.

The FCA in its market study on U.K. general insurance pricing practices found that home and motor insurance markets are not producing positive outcomes for all consumers. It is particularly concerned that certain "harmful" pricing practices are leading to insurers earning higher profit margins from certain customers. The regulator is considering series of reforms, including banning insurers from charging consumers more if they are deemed more likely to renew their policies rather than switch to another provider.

The Association of British Insurers welcomed the release of the interim report. The trade body's director general, Huw Evans, said in a statement that the insurance industry would "continue to work constructively" with the FCA to make sure the market works to the benefit of customers. He did, however, stress that potential "unintended consequences" needed to be considered so that a "fair and balanced approach" for all consumers could be achieved.

Timing questions

Woolard faced questions from journalists about whether the FCA was dragging its feet with regard to its approach to dealing with home and motor insurance pricing issues. The regulator introduced rules in April 2017 aimed at increasing transparency when policies renew, including ordering insurers to publish the prior year's prices in renewal documentation. It announced in April 2018 that it was looking at home insurance pricing.

Woolard defended the speed at which the regulator has moved, saying that it examined millions of policies going back over five years and needed sufficient evidence of market troubles before mandating reforms. Work done in 2017 had "partly addressed" some of the issues, "but as the study has shown us... there is far, far more to do," he added.