Five Questions On: Putting last year's price on insurance quotes

 

That sounds like a good idea. Who's suggested it - one of the consumer groups?

Actually the proposal has come from the Association of British Insurers (ABI), a trade body. It has asked the City watchdog, the Financial Conduct Authority, to set a new minimum standard of information applying across the market. This would make it compulsory for all new insurance quotes to include the cost of cover in the previous year.

That sounds tremendously useful. Why can't the ABI just make sure its members adopt it?

Because it only represents insurance companies. It wants the regulator to force brokers and banks to fall into line with the proposals as two-thirds of people buy home or car cover through intermediaries.

How would it work?

Under the proposed change, a renewal letter for home and motor insurance would have to include the amount paid by the policyholder in the previous year – alongside their renewal quote for the coming 12 months. So it would show at a glance whether premiums had gone up and, if so, by how much.

Any other reforms proposed?

Yes. The ABI also wants policy documents to include an explanation that any introductory discounts will not apply when the policy is up for renewal. Many insurers offer huge first-year discounts to attract customers and these disappear in the second year, meaning a leap in premiums.

So has there been a positive reaction to the proposals?

Yes. Richard Lloyd at the consumer group Which? said: "These simple changes could save people money by prompting them to shop around or haggle for a discount, and we urge the Financial Conduct Authority to adopt the proposals." However we are likely to have to wait some time for that, with the ABI hoping the measures could come in by late 2015.

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