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Question

Insurers make commercial decisions about the pricing of insurance following their assessment of the relevant risks. Currently premiums are being affected by specific economic factors that are increasing the cost of claims, such as the rising cost of replacement parts and materials. The Government does not generally intervene in these decisions as this could damage competition in the market.

However, the Government is determined that insurers treat customers fairly and firms are required to do under Financial Conduct Authority (FCA) rules. The FCA requires firms to ensure their products offer fair value (i.e. if the price a consumer pays for a product or service is reasonable compared to the overall benefits they can expect to receive).

On 16 October, the FCA announced a package of work in the insurance market amid concerns about rising prices. This includes a market study on premium finance – a form of credit that allows insurance customers to spread the upfront annual cost of their premium – for both home and motor insurance products.

On the same day, the Government launched a cross-Government taskforce on motor insurance. This Taskforce has a strategic remit to set the direction for UK Government policy, identifying short- and long-term actions for departments that may contribute to stabilising or reducing premiums, while maintaining appropriate levels of cover.