Health policies safe from 'price walking' rules - for now

Health policies safe from 'price walking' rules - for now

New rules to prevent insurers hiking the price of policies at each annual renewal will exclude health insurance, the regulator has confirmed.

Under the Financial Conduct Authority’s final rules for insurance pricing practices, insurers have until January 1, 2022 to implement the recommended pricing and auto-renewal remedies, reporting requirements and related glossary and administrative changes.

But the rules will not include private health, medical and pet insurance, where customers could lose cover for pre‑existing conditions or acquired benefits if they unintentionally don’t renew.

The aim of the new regulations, according to the City watchdog, is to “improve charges and transparency for all consumers”, such as preventing insurers from hiking premiums drastically each year - so called 'price walking'.

The rules aim to improve fairness and transparency for general insurance, but have caused concern among life and health protection specialists, who feared getting caught up in the long tail of the regulation.

In their responses to the consultation earlier this year, protection specialists told the FCA the nature of private health and medical insurance products, such as private medical insurance, should not be included. 

But even with the exclusions, some specialists have warned this could still be extended in the future to medical and health protection plans, if the regulator becomes more concerned over charges and transparency.

Talking to FTAdviser and the Chartered Insurance Institute earlier this year, Rob Evans, chief executive of Paymentshield, said the rules could draw pure protection within its purview.

At the time, he said: “This is much broader than just price walking. The focus is also on fair value and data collection on pricing; and includes anti-avoidance and transparency over charges.”

Phil Jeynes, corporate strategy director for Reassured, said the regulation could stretch more widely than the general insurance market, if the regulator feels there is a need for supervision, but said it was unlikely that any price walking rules would end up applying to healthcare protection policies.

He said: "In protection all the products I can think of are priced at outset and based on the insurers’ market rates at the time, combined with the underwriting outcomes of the individual.

"They tend to be long-term policies with a fixed monthly premium or one which rises in line with a set indexation factor.

"It’s therefore hard to see how price walking could have any read across from the general insurance world, wherein premiums are often calculated annually, with a tendency to offer low introductory rates and rely on customer inertia on subsequent renewals."