Are we there yet? FCA set to decide on the fate of insurance loyalty penalties

The FCA is expected to announce its final decision on whether to ban loyalty penalties (also known as "price walking") in home and motor insurance markets at the end of this month. 

The practice of insurers offering cheaper prices to new customers, which then steadily increase on subsequent renewals, has often drawn the ire of consumers and consumer champions alike. Under the FCA's proposals, when it comes to renewing a home or motor insurance policy, the customer would pay no more than they would if they were a new customer of the firm following the same sales process. 

The FCA's consultation on general insurance pricing practices - which closed at the end of January - has also proposed, as part of a comprehensive package of reforms:

• product governance rules, under which firms must consider how they offer fair value to all insurance customers over the longer term;
• requirements on firms to report certain data sets to the FCA (to monitor how the rules are being followed);
• simplifying how customers can cancel the automatic renewal of general insurance products.

Assuming the measures are adopted, the FCA is expected to publish a policy statement and new rules at the end of May. According to the FCA's update in March, firms will then be given an implementation period until:

• the end of September 2021 for the proposed systems and controls (SYSC) rules and product governance rules; and
• the end of 2021 for pricing and auto-renewal remedies, as well as the reporting requirements.

But this is unlikely to be the end of the matter, and attention may well turn to the consequences of intervention - in particular, the likelihood of higher prices for new customers.