The City watchdog blasted the insurance industry on Wednesday for ripping off home and motor punters after finding poor controls over the prices charged to customers.
The Financial Conduct Authority has launched a formal study after it said long-standing home insurance customers were often charged higher prices to cross-subsidise cheaper offers for new customers. It also suspects firms are making high profits from vulnerable customers.
“Our initial work has identified a number of areas of potential consumer harm,” said FCA chief Andrew Bailey. “If change is needed to make the market work well for consumers, we will consider all possible remedies to achieve this.”
More than 80% of people in the UK have one or more general insurance products and it generates £78 billion in premiums for the industry.
A preliminary investigation into 18 insurance firms selling home insurance found a lack of oversight and planning on the level of prices.
The FCA said boardroom and chief executive teams were “too distant” from pricing decisions and couldn’t prove customers were being treated fairly on prices they were charged.
The Association of British Insurers’ Hugh Savill said: “We agree that the market is not working as well as it should for some long-standing customers.”
