JEFF PRESTRIDGE: FCA has work to do over insurance pricing

JEFF PRESTRIDGE: Policing insurance pricing is a task that brilliant mathematician Alan Turing would have struggled with – is FCA up to the job?

Praise from the country’s financial regulator? No way, I must be dreaming. But yes, it’s true – it wasn’t a fairy tale dream that I experienced a few days ago. It actually happened. 

The regulator, the Financial Conduct Authority, took time out from its exhaustive three-year investigation (sarcasm intended) into the rotten investment egg that was Woodford Equity Income to applaud our work exploring the murky world of insurance pricing. I nearly fainted. 

By the way, I really wouldn’t advise you to traipse around the world I have been grappling with for six months. You enter it at your peril – I’ve been driven nuts by it all. 

Finger on the pulse: Is the Financial Conduct Authority really up to the job of policing insurance pricing?

There’s more on the dreamlike front. Not only did the FCA praise our investigative probe into whether its new rules governing the pricing of car and home insurance are working or being sidestepped by some insurance companies.

It also engaged with us, something it hasn’t done until very recently (it’s also kept us informed on its impending regulation of the pre-paid funeral plans market as a result of our groundbreaking investigation into the financial cesspit that is failed plan provider Safe Hands Plans). 

So, rather than lock itself away in its swanky East London ghetto and opine from upon high, the regulator is, for the time being, very much in listening mode. 

Goodness gracious. It absorbed the information we sent it early last week on what many readers think about the new insurance pricing rules (they’re not working) and said it was on the case.

Top award for Jeff 

Jeff Prestridge's tireless personal finance campaigning has been acknowledged

Jeff Prestridge’s tireless personal finance campaigning has been acknowledged

Jeff Prestridge’s tireless personal finance campaigning was acknowledged last week when he was named Journalist of the Decade in the specific area of protection insurance. 

He was given the award by critical illness insurance comparison website CIExpert. 

Alan Lakey, director, described Prestridge, right, as ‘fearless, fair and challenging’ who has ‘never been afraid to criticise as well as compliment – a good friend, an imposing enemy’. 

So, as I report opposite, not only a thank you from the FCA for ‘the market intelligence provided to us by various parties, including The Mail on Sunday’ – but confirmation that it is concerned about the issues we have been raising since the turn of the year. 

Namely, that so-called price walking (discriminating against loyal customers to the benefit of new ones) hasn’t been stamped out altogether as the regulator hoped it would be – ‘saving’ loyal customers £4.2billion in premiums over the next decade. 

The result is that the FCA has now asked between 60 and 100 companies (a mix of insurance companies and brokers) to prove to it that they have eliminated price walking – or the ‘loyalty premium’ as it is also called.

As it says in its statement (left), any companies guilty of a flagrant abuse of the new rules face ‘serious consequences’. 

To elaborate, they could be stopped from conducting new business until they conform to the new regulations, individual directors could be sanctioned, and big fines could be issued. 

Although I might be wrong, I have an inkling that some insurers are currently running rings around the regulator. 

In some instances, they are using exceptions granted by the regulator to offer cheaper cover to new customers.

Exceptions that might make sense to the regulator, but not to the many insurance company customers that I have spoken to over the past six months. 

In other cases, insurers are operating close to the wire. 

Policing insurance pricing is a task that the brilliant mathematician Alan Turing would have struggled with. 

In the coming months, we will see whether the FCA is really up to the job.