Chapter 4: Renewals and Cancellation Flashcards
Why would an insurer be keen to encourage renewals?
Renewals are cheaper than new business
Statistical information and forecasting will be more accurate
How will an insurer seek to 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
Is there an obligation to renew?
Usually no although sometimes there may be a long term agreement
When can there not be a renewal?
For one-period insurance eg contractors/construction work or a one off event
Why is the FCA concerned about auto-renewals?
New business may be priced differently to renewals. New business may contain discounts or incentives to entice new customers which are then removed at renewal, leaving an existing customer paying more than a new customer
What does the FCA require to be included in renewal notices for general consumer insurance? Who is responsible for this?
- Last year’s premium
- Encouragement to shop around
- An additional encouragement to shop around for customers on their fourth renewal
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?
Remind consumers of the 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?
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
What must an insurer ensure about a policy that auto-renews?
The fact that it auto renews must be clearly communicated to the customer
For private insurances where no claims have been made, how will insurers typically treat renewal?
A computer generated renewal notice will be issued as no underwriting intervention is needed (unless the insured notifies of a change in circumstances)
You pay for your private car insurance via direct debit on a monthly basis. You receive a renewal notice from your insurer and are happy with the renewal premium and wish to continue with the policy. What action do you need to take?
None - payment of the first instalment via direct debit will be taken as acceptance
Typically, how much notice should an insurer give if they want to cancel a policy mid-term?
7 days
But this is dependent on the cancellation condition so may vary
What does the FCA say about information given to a customer at renewal? Where does this rule come from?
The information provided must be “appropriate”
Chapter 6 of ICOBS
Does renewal constitute entering into a new contract, or a continuation of the current one?
New contract
