Context
The FCA has updated its Q&As related to General Insurance Pricing Practices.
Key points to note
The ‘what’s new’ boxes at the bottom of the Q&A document indicate the following change was made on 6th January 2023:
1.14 Can firms use tenure as a risk rating factor?
Previous answer replaced with: Firms can take into account risk factors which may sometimes correlate with aspects of a customer’s tenure. For example, fraud risk may generally be expected to be lower with where the customer has longer tenure with the particular insurer. Telematics data, relevant to the risk being underwritten, may lead to the price of the insurance cover going up or down over time as the increased data could give a greater insight into the behaviour of the driver in question.
Crucially, although these are factors may which rely on gathering information over time or happen to overlap with aspects of correlate with tenure, the pricing rules do not provide the ability for firms to rely on tenure alone. Instead, firms are able to utilise relevant risk information that may be acquired during the term of the customer’s current policy (and during their relationship with the firm).
Next actions
None – for information and awareness.