4 - Renewals and cancellation Flashcards
Why an insurer encourage renewals?
Renewals costing less than acquiring new business, if the client base remains stable, statistical information about the portfolio will be more accurate.
How will an insurer ensure their policies are renewed?
By sending out renewal notices before expiry, or in some cases (eg motor) auto-renewal. Auto-renewal must be clearly advertised to the customer
Why is the FCA concerned about auto-renewals?
Renewals are not necessary cheaper (new customers can get discounts)
What does the FCA require to be included in renewal notices for general consumer insurance? Who is responsible for this?
- disclose last year’s premium on renewal notices;
- include text to encourage consumers to check their cover and shop around for the best deal; and
- identify consumers who have renewed 4 consecutive times and give these an additional prescribed message encouraging them to shop around.
Insurers and intermediaries
Other than what the FCA mandates, what is generally included in a renewal notice?
- Notice that the period of insurance is coming to an end
- Renewal premium
- Any proposed changes
Under CIDRA 2012, what must insurers do about representation at renewal?
Repeat questions and answers on the proposal form of the original policy to ensure they are still accurate
What does the Consumer Rights Act 2015 say renewal notices should be?
Transparent and prominent
What is the insurer’s right of cancellation during a policy?
Depends upon the cancellation condition in the policy. Usually they must provide at least 7 days written notice but commonly longer, up to 30 days. If invoked (rarely is) they must return any premium pro-rata.
Sometimes the cancellation condition may limit the circumstances under which the insurer can cancel the policy
What happens to the duty of disclosure at renewal?
It is revived
What are the insured’s rights of cancellation during a policy?
Following inception or renewal they have a 14 day cooling off period. Mid-term it would depend on the cancellation condition, they may be able to cancel but would pay a penalty (short-term premium) for doing so, so would not receive a pro-rata refund
Why would an insurer charge a fee in the event the insured cancelled the contract?
To cover administration costs of setting up and cancelling the policy
What does the Consumer Rights Act 2015 say about cancellation fees?
They cannot be “disproportionately high”
In the case of ancillary insurance policies, what happens when the primary policy is cancelled?
*pomocniczy
The ancillary policy must also be cancelled
When may an insured not be entitled to any refund when cancelling a policy mid-term?
When there has been a claim during that policy period
When must customers be provided with information about renewal? Where does this rule come from?
In good time. Comes from Chapter 6 of ICOBS
