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FCA stops insurance companies’ loyalty penalty

Today, (28/05/21) the FCA  implements a package of remedies to improve competition and protect home and motor insurance customers from loyalty penalties.  This follows the announcement on  22 September 2020 when the FCA said that it would reform home and motor insurance. It is focussing particularly on the current “loyalty penalty” that punishes existing loyal clients’ premiums and favours new clients.

In 2018 it found that some 6 million policyholders were paying high or very high margins over and above an average premium. Had they have paid the average for their risk, they would have saved £1.2 billion! It published a 31-page report on the insurance market and finally (two years later!) announced a consultation in September which closed 21 January 2021.

Many insurance companies auto renew policies at a much higher price. New customers benefit from a much lower price. A term known as “price-walking”. The only way to get a better price currently is to shop around and switch. The companies even use what could be considered underhand processes and tactics to target customers who they think are the least likely to switch with the best deal.

bmw car hire

The FCA estimates that consumers will save 4.2 billion over 10 years. The measures are due to come into force on different dates. The pricing, auto-renewal and data reporting remedies come into effect on 1 January 2022 and the rules on systems and controls, product governance and premium finance from the end of September 2021.

New rules for insurance companies

The new rules will mean that insurance companies must

  • Provide easier methods of cancelling the automatic renewal of their policy.
  • Offer the same price at renewal as they would to a new customer
  • Report data to the FCA for it to monitor and supervise the sector more effectively
  • Consider how they offer fair value to their customers

The FCA needs to ensure that it monitors adherence to these rules and takes action against companies which don’t. It still does not mean that you will get the best price on renewal as there could and probably will be better offers out there. See How to save money on your car insurance

FCA announces remedies to stop the loyalty penalty

How to save money on insurance and beat the auto renewals

How to save money on insurance and beat the tactics used to make you renew


Help with complaints

Cover of How to Complain updated 2019 large cow logoTo ensure that you know your rights and how to use them take a look at How to Complain: The Essential Consumer Guide to Getting Refunds, Redress and Results, as one reviewer says you’ll get more than your money back the first time you use it!



101 Habits if an Effective complainer book cover with logo


101 Habits of an Effective complainer designed to improve the way you look at and make complaints. Each page gives you a complaining habit to consider and an example of how and why it empowers you to become more effective in getting the results you want.


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Latest News telecoms

Carphone Warehouse mis-selling results in FCA fine for over 29m

Whistle blowers to be thanked for FCA investigation

The mis-selling of insurance

Following a whistle blowing report and investigation, The Financial Conduct Authority (FCA) has fined Carphone Warehouse for mis-selling insurance. It found that the company had sold mobile phone insurance and technical support (called Geek Squad) to people who didn’t need it.

Carphone Warehouse FCA fine

The FCA fined Carphone Warehouse £41,582,300. However, Carphone Warehouse was given a 30% discount for agreeing with the findings. So it will pay £29,107,600.

How Carphone Warehouse mis-sold insurance

The FCA investigated a period over 8 years (1 December 2008 to 30 June 2015). Sales of Geek Squad policies were worth over £444.7 million in this period. The FCA found a number of issues relating to mis-selling and these included:

  1. Carphone Warehouse did not give sales assistants appropriate training. For example, they did not asses customer’s needs as to whether the insurance was required. Some customers had home insurance or bank account insurance for instance that would cover them.
  2. Sales staff were trained in “objection handling”, with the focus being on overcoming customer objections rather than assessing whether the product was suitable for the customer.
  3. A large number of policies were cancelled early. For example in January 2014 30% of policies were cancelled within the first three months of inception. Despite this being an indicator of high risk of mis-selling Carphone Warehouse did not consider it.
  4. When customers complained about the insurance sale, Carphone Warehouse failed to properly investigate and fairly consider their complaints. So valid complaints regarding mis-selling were not upheld and it contributed to the inaccurate picture of mis-selling indicators.

Whistleblowers to thank for Carphone Warehouse investigation and fine

It was Carphone Warehouse employees not customers who brought this matter to light.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

“Without whistleblowers coming forward, these practices may never have come to light.  In the past few years, whistleblowers have contributed critical intelligence to the enforcement actions we have taken against firms and individuals.”

How to complain if you have been mis-sold phone insurance

The FCA says “Customers of The Carphone Warehouse who think that they may have been mis-sold Geek Squad should contact the firm directly (by telephone: 0800 049 6190, by post: Geek Squad, PO Box 358, Southampton, SO30 2PJ or on-line If customers are not content with the firm’s response, they may then refer the matter to the Financial Ombudsman Service.”

If you have been mis-sold insurance or service etc. it is a breach of The Consumer Protection from Unfair Trading Regulations 2008 (amended 2014) and you should write to the company quoting that Act. (See link for details of the Act and how to use it).