How do the rules apply to non-price setting intermediaries?

The Financial Conduct Authority (FCA) General Insurance (GI) pricing practices – how do the rules apply to non-price setting intermediaries?

In May 2021, the FCA introduced new GI pricing rules, with some provisions now in effect, and others coming into effect in January 2022. These rules are to ensure that renewal prices are no higher than those offered to new customers (i.e. the equivalent new business price - ENBP).

The new pricing restriction only applies to insurers and intermediaries involved in price-setting, so what do the changes mean in practice for non-price setting intermediaries? 



Definition of a renewal

In August 2021, the FCA published an amendment to the requirements which clarified the definition of a renewal for the purposes of the new rules:

  • Where a firm actively moves a customer to another channel, distribution arrangement or to a similar policy at the end of an existing policy - this should be treated as a renewal
  • Where an existing customer actively buys a policy with the same firm through a different channel or distribution arrangement - this should be treated as new business rather than a renewal

Incentives and new business discounts

Cash or cash‑equivalent incentives as well as any individually negotiated discounts offered to new customers must be reflected in the ENBP.

The FCA clarified that these rules also apply to:

  • Intermediaries that set prices at renewal by adding their commission to a net price set by an insurer
  • Intermediaries offering a cash-equivalent incentive on a gross price set by an insurer
  • Intermediaries that offer either cash or retail vouchers to new business customers alongside the price set by the insurer


Fees charged to customers at renewal must not be higher than those charged to new customers.

This applies to arrangement fees that are charged as part of insurance distribution (including those at renewals). This does not apply to contingent fees, such as fees for mid‑term adjustments.


Where a firm becomes aware that another party in the distribution chain is not or may not be complying with the GI pricing rules, it must report this to the FCA. 

Whilst not all the rules apply to non-price setting firms, it is still important to understand the new pricing rules for notification purposes. 

Premium finance and active election 

Retail premium finance is considered an ‘optional additional product’ for the purpose of the new rules. As such, a firm offering premium finance must ensure the customer has actively elected to obtain it before entering into an agreement.

The FCA noted that offering the customer the choice between paying monthly or annually is insufficient to prove active election.

Premium finance – remuneration 

Firms must not be remunerated, or remunerate or assess the performance of their employees, in a way that conflicts with the best interests of customers. This is already a requirement for insurance products but will be extended to cover premium finance. 


Firms need to inform customers of the following:

  • Whether their policy will auto-renew
  • The effect of the auto-renewal
  • If they need to take action to accept the renewal offer
  • Having the right to cancel the auto-renewal at any time

Customers must be given the option to stop autorenewal using at least the same methods offered when purchasing a new policy. This information must be provided in good time and in writing or in another durable medium before conclusion of the contract.

Whilst the rules relating to autorenewal disclosure come into effect on 1 January 2022, the FCA has added a transitional provision that allows firms until 17 January 2022 to have the required processes in place. The FCA updated the rules to make clear that, where a firm uses the transitional provisions, it must take retrospective action to provide the required auto-renewal disclosures for all communications made during the transitional period, irrespective of when the contract concludes.

Sales practices

When communicating a renewal price to customers, or when contacted by customers to discuss a renewal price, firms must not systematically discriminate against customers based on tenure. This includes communicating the price of any additional products at renewal. 


For reporting purposes, commission‑rebated business counts as gross‑rated business, where only the insurer is required to report data. However, the FCA is introducing a requirement for intermediaries to notify them where over 25% of either their home or motor sales include commission‑rebating.

Product governance

The FCA enhanced their product governance rules to include an assessment of fair value and to cover premium finance arrangements. Add-ons offered alongside the main product should also provide fair value to customers.

Insurance distributors must be able to provide certain information to manufacturers on request including remuneration, add-ons and any conflicts of interest.

Product distribution 

Distribution strategies must be consistent with the aim of providing fair value to the customer. Product distribution arrangements must be reviewed at least every 12 months.

The FCA set out considerations for firms, including:

  • The benefits the product is intended to provide to the customer
  • The characteristics, objectives, interests and needs of the target market
  • The price paid by the customer and the extent, and quality of any services the distributor provides
  • Whether remuneration received by the firm for the product provides fair value to the customer
  • Any potential detrimental effect on the intended value where the product is to be distributed as part of a package

Distribution arrangements should not result in:

  • A level of remuneration that is not reasonable to the costs, contribution or benefit added to the arrangement for the distribution of the product
  • Product recommendations that do not meet the customer’s needs or disregard the customer’s best interests as a result of the firm’s remuneration arrangements
  • The overall price of the package is disproportionate to the overall benefits provided by the package, where insurance is distributed as part of a package

The level of any remuneration not being reasonably reflective of the costs actually incurred

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