PAYMENTSHIELD'S RESPONSE

Following a market study in September 2020 on General Insurance practices, the FCA found that Home and Motor insurance markets were “not working as intended for customers”. To address this, the FCA conducted a “General Insurance pricing practices” consultation process and then published a policy statement in May with a new set of rules to make things work more fairly for the customer.

Paymentshield has fully embraced the FCA’s guidance, and we hope to lead the way in reacting to these changes, delivering full and robust compliance with the FCA’s guidance to make sure both Paymentshield and our partners are driving the best possible customer outcomes.

We’re on schedule to meet the FCA requirement of 1 January 2022 to have these new rules in place.

Here’s an overview of the steps we’re taking:

Auto-renewal

The FCA has asked for insurance providers to make sure that it’s clear to customers they have the option to opt out of auto-renewal and what this will mean for them. From the 13 December 2021, advisers will need to make their clients aware of their options around auto-renewal of their Paymentshield Home Insurance. When applying for a policy via our unique Adviser Hub, advisers will be presented with text on screen which they’ll need to read to their client to provide a clear choice to opt-in or out of auto-renewal. If the client wishes to remove themselves from our auto-renewal service, then they can simply un-check the box shown on screen (see below).

Image showing where the opt in appears.

If they choose to opt out of our auto-renewal service, a message, similar to the one below, will appear on screen. The message will be specific to the policy they’re applying for. The adviser will need to read this message out to their client.

Image of opting out message example

Customers can change their mind at any time and let us know by either calling us on 0345 601 1050 or by contacting us here. Full information on auto-renewal and how to change preferences will be available via Paymentshield.co.uk

As the customer will have to take action to continue insurance cover should they opt out we’ve set up a robust process to make sure we give them plenty of time and reminders to renew or arrange alternative cover thereby reducing the risk of an unwanted insurance lapse that could otherwise lead to disastrous financial consequences – especially for our most vulnerable customers.

Auto rebroke

We’ve also enhanced our auto-rebroke service for those customers who choose to auto-renew with us. We’ll be keeping renewal prices competitive and helping you retain your clients by checking prices from our full panel of insurers, no matter what their renewal prices comes back as, every year to see if we can find them a cheaper price.

This will happen automatically for all renewals taking place from 13 December 2021.

Pricing Remedy

The FCA has issued guidance on pricing which includes the ban on price walking (where products are discounted in the first year, but the price then increases at renewal and subsequent years) for Home Insurance. Going forwards, where a firm offers a renewal price to a consumer, it should be no greater than the equivalent new business price.

We’ve always taken an intelligent approach to pricing to ensure our policies are competitive at new business as well as renewal, but we welcome the FCA’s approach to level the playing field by banning price walking and giving advisers the best possible chance to compete by helping to create a focus on value rather than price.

Even ahead of the full FCA guidance around pricing being published, Paymentshield had set up a project supported by a full governance framework, to make sure we were confident we fully complied with the new guidance by the deadline set and we’re confident that our renewal prices will never be greater than the equivalent new business price.

We expect it will take some time for the industry to adjust to this new pricing landscape but expect initially that advisers might see new business prices across the wider market increase, while renewal prices will generally go down. Paymentshield will submit regular reports to the FCA on our pricing activity.

Fair value

The FCA has said that all companies in the distribution chain, right down to adviser level, have a responsibility to demonstrate that both the initial and recurring income they receive for servicing customers represents fair value.

To make sure we’re fully meeting the FCA’s latest guidance on ‘fair value’ we’ve scrutinised our commission payments to make sure they fairly reflect the time and effort involved in selling our insurance. Due to the expertise involved in selling a policy, we’re confident the initial and recurring commission represents fair value.

The FCA has also asked that insurance companies consider fair value for payments made throughout the lifetime of the policy (not just new business). Given that customers’ circumstances are likely to change over time, if a review has not taken place within 10 years (or 20 years for accident, sickness, and unemployment policies) commission payments will be paused until a policy review is undertaken. This will take effect from 1 January 2022.

We know how seriously advisers take their duty of care to customers, with many conducting regular reviews of their client’s policies. Indeed, as the average life of a Home Insurance policy is only 5 years, we don’t expect this to cause a significant reduction in advisers’ income, especially where firms already regularly review their client’s insurance. We hope, as the FCA intended, this will encourage more advisers to proactively review their customers’ general insurance needs where they’re not already taking place.

We’ve also always advocated the value of advice and the importance of advisers continuing to support their clients on an ongoing basis. This is one of the reasons we already provide advisers with data such as renewal and cancellation information within our Adviser Hub to help advisers proactively manage their GI book of business.

Paymentshield has operated a product governance framework for some time with regular product reviews taking place for all products. Going forwards we’ll need to carry out a review and fair value assessment every year for each of our products to make sure they’re working as expected. As part of this, we’ll have to consider the role and remuneration of all parties in the distribution chain.

We may need to collect information from firms to help us understand and document your role and evidence value for money. Whilst we’re still in the process of finalising an easy to complete template for this information, it is likely to include a request for information about the products, services and costs that are offered to end customers.

If you have any questions about any of the information here, you can check our FAQs or contact our team who will be happy to chat with you. Call us here: 0345 061 5700 or by contacting us.

CONTACT US HERE

FAQs

INTERMEDIARY SALES TEAM

For any sales related enquiries call our UK team:

0345 0615 700

Mon to Fri: 9am - 5pm