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

3. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

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

14. 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

15. 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

16. 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

17. No refund

19. 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.

20. 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.

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

22. 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.

23. 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.