Renewals and Cancellations Chapter 4 Renewals and Cancellations 3 questions = 4% of the exam

Learning Objectives: After studying this chapter, you should be able to: Explain the significance of procedures relating to renewals Explain the meaning and significance of the cancellation clause

Duration of insurance How long do most insurance policies run for ? 12 months Contractor policies – may be short term Travel Insurance – may be single trip Long term agreements

Offer and acceptance Is there an obligation to offer a renewal (Insurer) or accept a renewal (Insured) ? No obligation to offer or accept renewal Renewals good for insurers: Cheaper than new business Already got good information about risks it insures – want a stable customer base

Renewals What are the rules relating to renewals found in ICOBs ? Dual pricing is a current FCA issue Must tell insured if not intending to offer renewal

Renewal notices must show last year’s premium Must include text to encourage insured to review cover and shop around Identify customers who have renewed 4 or more times Extra encouragement to shop around FCA rules – since April 2017

Consumer Insurance (Disclosure and Representations) Act 2012 Insurer must ensure customer is aware of material facts relevant to the contract Remind customer of questions and answers original contract was based on Are they still accurate

Consumer Rights Act 2015 Fair notice must be given to customers No unfair contract terms Transparent and prominent notices to customers Probably already doing because of FCA rules

Automatic and Assumptive renewals FCA have concerns Risk that consumers are treated unfairly

Policy condition – Insurer cancellation Insurer must give at least 7 days notice by recorded delivery (can be up to 30 days) Insurer must give proportionate return of premium Rarely invoked by insurers

ICOBs 7.1.1 14 day cooling off period on consumer contracts Consumer must give notice of cancellation before this deadline – on paper or durable medium Insured also has the right to cancel mid term May not get a proportionate refund

Consumer Rights Act 2015 Can charge cancellation fees if not disproportionately high Add-ons (ancillary policies) must be cancelled at the same time Example is Legal Expenses addition to motor insurance

No refund

In respect of the cancellation condition under a fire policy what must an insurer do? Send a written notice of cancellation to the insured's broker. Advise the insured's bank. Telephone the insured within a reasonable period before the renewal date. Send a written notice of cancellation by recorded delivery to the insured's last known address.

Under Insurance Conduct of Business Sourcebook (ICOBS) rule 7. 1 Under Insurance Conduct of Business Sourcebook (ICOBS) rule 7.1.1R, how many days does a consumer have to cancel a policy under a general insurance contract? 0. 14. 7. 21.

What type of policy is sometimes issued on a short-period basis? Engineering breakdown cover. Motor fleet. Employers' liability. Contractors' all risks cover.

Insurers like to maintain a stable client base Insurers like to maintain a stable client base. This benefits them because: they can offer incentive discounts. their costs will remain constant. their statistics will be more accurate. they are able to grow their business more easily.

Assumptive renewals are of concern to the FCA because they may breach which of their regulatory principles? Clear, fair and not misleading communication. Treating customers fairly. Managing conflicts of interest. Conducting business with integrity.