The website imposed ‘most favoured nation’ clauses on home insurance providers selling through its platform, which barred Compare the market from being undercut elsewhere.

As a result, competition between price comparison websites and between home insurers selling through these platforms, was restricted, said the CMA.

This meant rivals were unable to compete harder by reducing commission fees, for example, putting Compare the Market under less competitive pressure.

On 30 November 2017, two months after the launch of the CMA’s investigation, Compare the Market contacted the insurers to inform them it would no longer be enforcing the ‘wide most favoured nation’ clauses.

The investigation ran for two years from December 2015 to 2017.

Michael Grenfell, the CMA’s executive director for enforcement, said: “Price comparison websites are excellent for consumers. They promote competition between providers, offer choice for customers, and make it easier for consumers to find the best bargains. It is therefore unacceptable that Compare the Market, which has been the largest price comparison site for home insurance for several years, used clauses in its contracts that restricted home insurers from offering bigger discounts on competing websites – so limiting the bargains potentially available to consumers.”

He added that digital markets can yield great benefits for competition and warned it would not hesitate to step in again across the market to protect consumers.

Martin Schulthiess, chief commercial officer at Uinsure said: “This news is another blow for consumers, following the FCA’s conclusion that unfair pricing practices is widespread and costing customers at renewal.

“We estimate over 600,000 advised mortgage customers will choose their home insurance through price comparison websites each year. If there was ever a time for advisers to offer advice through an intermediary insurer who can give reassurance of fair pricing practices – it’s now.”

The Financial Conduct Authority (FCA) has revealed a number of proposals to tackle concerns about general insurance pricing following a study of the industry.

It proposes that when a customer renews their home or motor insurance policy, they pay no more than they would if they were a new customer with the firm when buying through the same channel.

As an example, if an existing customer bought a policy online, they would be charged the same price as a new customer buying online.

The FCA said that while firms would be free to set new business prices, they would be prevented from increasing renewal prices over time – known as ‘price walking’ –  other than due to changes in a customer’s risk profile.

It is also consulting on making it simpler to stop automatic renewals across all general insurance products.

The proposals come after its market study revealed concerns about pricing, and it wants to enhance competition, trust and fair value for customers.

It said firms use “complex and opaque” pricing practices which allow them to raise prices for customers who renew each year. While some switch deals, many lose out for their loyalty.

Further, it said firms target price increases on those less likely to switch and use practices that make it harder for people to leave. As a result, it found six million policyholders were paying high or very high margins in 2018.

If they had paid the average for their risk profile, they would have saved £1.2bn.

The FCA added that its proposed remedies should lead to lower prices, saving customers £3.7bn over a decade.

Christopher Woolard, interim chief executive of the FCA, said: “We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in future, and put an end to the very high prices paid by some long-standing customers.

“The package would also ensure that firms focus on providing fair value to all their customers. We welcome feedback on the proposals.”

The consultation on the proposals is open until 25 January 2021, with any new rules coming into effect four months after it publishes a policy statement.

Simply providing each mortgage client with a home insurance quote could significantly boost income, insurance company Paymentshield found.

Remortgage and product transfers are a huge area of missed opportunity, amounting to £10m alone in lost commission, according to the research.

Paymentshield said the revenue stream could help soften the impact of coronavirus for many advisers.

The insurance firm has launched a 22 per cent pricing reduction for new remortgage, product transfer and equity release clients, in the hope more advisers will have insurance conversations on every mortgage.

Paymentshield is also offering a three-month payment holiday option – which will form part of its permanent proposition.

It is hoped these initiatives will help boost adviser businesses integrating insurance sales into their proposition for the first time.

Since April more than 350 adviser businesses have submitted an insurance quote through Paymentshield for the first time.

Emma Green, head of sales at Paymentshield (pictured), said: “Having a conversation about home insurance is often not perceived as a priority by advisers, but they are missing out on a huge amount of commission.

“Remortgage and product transfer clients in particular are often overlooked when it comes to a general insurance conversation.

“We know from our own research that nearly half of advisers admit to missing opportunities to sell general insurance.

“When it comes to remortgage and product transfer clients this is because of renewal dates not matching, cancellation fees, or simply because clients perceive their existing policy to be meeting their needs.

“As a result of Covid-19 more consumers are starting to review the protection products they have, from wills, life insurance, mortgage protection and home insurance – so the benefits of reviewing policies for remortgage, product transfer and equity release clients are also clear.”

The regulator published the interim report of its market study into the pricing of home and motor insurance and said competition in the insurance market was “not working well” for consumers as they tended to pay more when they failed to switch or negotiate. 

Other potential measures set out by the regulator included requiring firms to automatically move consumers to cheaper or equivalent deals, a halt on practices that discourage switching and requiring firms to publish information about price differentials between customers. 

It also said it would consider making firms be clear and transparent in their dealings with consumers – including improvements to the way they communicate with customers and to embrace the benefits of long-term innovation such as technological developments including Open Finance. 

Overpaying on policies 

The FCA estimated that around six million policyholders paid high prices and were not getting a good deal on their insurance.   

It said if those customers paying high premiums paid the average premium for their risk, they could save around £1.2bn a year.   

The FCA said this included one in three people who were potentially vulnerable.  

Mortgage brokers and lenders have a larger share of the home insurance market than insurers, with ‘other intermediaries’ making up 34 per cent compared to the 27 per cent of policies distributed directly through insurance firms.   

Banks and building societies make up 24 per cent.  

When it comes to motor insurance, consumers tend to go direct to the insurer with 60 per cent of policies being distributed through this channel.   

Banks and building societies hold three per cent of the market while other intermediaries make up 31 per cent.  

Loyal consumers pay more 

The FCA’s report found insurers often sold discounted policies to new customers while increasing premiums when customers renewed, targeting increases at those less likely to switch.  

It also found longstanding customers were likely to pay more on average although sometimes, people who switched paid higher prices.  

From the FCA’s consumer research, one in three consumers who paid high premiums showed at least one characteristic of vulnerability, such as having lower financial capability.

For consumers who bought combined contents and building insurance, lower income consumers – below £30,000 – paid higher margins than those with higher incomes.  

The regulator also found that people who paid high premiums were less likely to understand insurance or the impact renewing had.

Most firms did not make it clear that when setting a price, the expectations of whether a customer will switch or pay more was considered. 

The FCA’s research discovered that consumers who switched or negotiated could get a better deal, but firms often engaged in practices to discourage switching.  

Market ‘not working well’

Christopher Woolard, executive director of strategy and competition at the FCA, said: “This market is not working well for all consumers. While a large number of people shop around, many loyal customers are not getting a good deal.  

“We have set out a package of potential remedies to ensure these markets are truly competitive and address the problems we have uncovered. We expect the industry to work with us as we do so.” 

The FCA intends to publish a final report and consultation on remedies in the first quarter of 2020.

The partnership deal included whole-of-market cover that is fully integrated with Primis’s Toolbox system.

Source said it would provide cover for up to 95 per cent of risks including those deemed non-standard, a learning lab for advisers to earn continuing professional development (CPD) hours and a broker loyalty scheme.

“We are enhancing our general insurance (GI) offering for advisers by adding Source’s expertise, service and education to our panel,” said Nicky Hemmings, Primis’s general insurance proposition manager.

“We plan to develop more partnerships that will integrate with Toolbox and we will announce these during the coming year,” she said.

“This integration shows the potential of technology within the mortgage market. We want to grow GI and to make GI products more accessible,” said Brian Coulton, Source head of intermediary.

It found that insurance complaints have soared by more than 60 per cent in the past five years – with as many as one in three upheld in favour of the customer by the FOS.

The consumer champion looked at complaints data from the FOS and found that between April 2018 and March 2019, 25,122 travel, home and car insurance policyholders escalated a complaint – a 61 per cent rise on five years ago, when there were 15,625 cases.

About a third of these complaints were resolved in favour of the policyholder – meaning the insurer either reconsidered its decision or was obliged to pay out.

Which? found buildings insurance was the worst area for complaints, with a 42 per cent rise compared to last year and 35 per cent of complaints found in favour of the customer.

Travel insurance had the second highest rate of upheld complaints, with 34 per cent of cases found in favour of the customer. More than 41 per cent of complaints about Allianz travel insurance policies were resolved in favour of the policyholder – the highest uphold rate among all travel insurers.

About three in 10 (29 per cent) complaints about car insurance providers were upheld in 2018. In this area, Great Lakes had the highest proportion (42 per cent) of complaints upheld.

Insurers not handling complaints fairly

Which? said the rise in insurance complaints, particularly regarding building and travel insurers, suggested providers may not be handling claims fairly, forcing customers to turn to the ombudsman.

Using keywords to analyse five years’ worth of complaints data, Which? found the three most commonly disputed issues between policyholders and insurers were exclusions, non-disclosure and pre-existing conditions.

Jenny Ross, Which? money editor, said: “Our analysis reveals a steep rise in insurance complaints referred to the ombudsman, and while it is encouraging that consumers feel empowered to challenge insurers, we have concerns that firms may not be handling claims fairly.

“When choosing an insurance firm it’s worth checking its record with the ombudsman to gauge how it treats customers – a firm with a high proportion of complaints upheld in favour of customers should be a red flag.”

Advisers who know their customers can get a buildings and contents insurance quote by answering just one question, which is whether their customer, or anyone living with them, has made any buildings or contents claims in the past five years.

Legal and General told Mortgage Solutions that it has partnered up with a number of third parties and the data these third parties hold, which is publicly available, combined with its own experience and data, gives Legal and General all the detail needed to underwrite the policy.

It also said that it is rolling SmartQuote out to current users of its GI Connect quote and apply platform over the coming weeks, but they need to be registered on this system to access it.

The company also revealed that SmartQuote “does not affect the customer’s ability to make a claim provided they can agree to the assumptions Legal and General has made.”

The software will also provide advisers with access to Legal and General’s latest product offerings Home Insurance Plus and Home Insurance, providing improved features, such as increased buildings and contents sums insured.

Simon Hird, director of broker and intermediary at Legal and General, General Insurance (pictured), said that SmartQuote is redefining the rules on how advisers and their customers get a quote for home insurance and challenging any lingering misconceptions about the quotation process.

He added: “Gone are the days of endless questions and the home insurance journey being considered a hassle or time-consuming.

“With research showing that one in four households has no contents cover, it is clear that customers are too often ignoring the importance of protecting their home.”

However considerable advancements in construction methods brings new risks – for example, some of the new materials used can pose a much greater fire risk than traditional materials.

What are the risks and the insurance implications that brokers should be aware of when arranging suitable cover?

Modern Methods of Construction (MMC) increasingly favoured by house builders today have varied over the years, but generally they involve:

• Volumetric units – homes constructed in the factory as one or more fully finished modules, erected on site;
• Pods – a single room constructed and fully finished in the factory;
• Panelised construction – factory made wall or floor panels that are fixed together on site;
• Sub-assemblies and components – various pre-manufactured parts of the home, including roof panels and chimneys;
• Site-based MMC – innovative methods used on site such as insulated concrete formwork or thin joint blockwork;
• Composite panels – factory engineered and used mainly for exterior cladding, partitioning, load bearing walls and roofing elements;
• Timber framed buildings.

Modular difficulties

The National House Building Council found that 98% of medium to large housebuilders have used or are considering using MMC.

But properties constructed this way, particularly using modular construction, can be particularly difficult to insure adequately.

Replacing part of a ceiling damaged by a water leak for instance may not be as straightforward as cutting out the affected area and replacing it.

To replace only part of a load bearing panel may cause structural issues. In some cases what might appear to be a small amount of damage could result in whole sections needing to be rebuilt.

Fire too is an ever-present risk – particularly where combustible materials are used within panels where fire can spread quickly.

While design and build methods improving fire resistance should take account of the ongoing safety aspect, with each element of the panel on its own being combustible, if the integrity of the panel were compromised, then the risk escalates.

Bespoke broking

The materials used in construction have a dramatic impact on the level of insurance cover required and the premium.

Any dwelling which has been constructed using out of the ordinary building techniques or materials is likely to need bespoke broking.

Compliance with building regulations is not enough to satisfy an insurer – it does not guarantee that a building is ‘standard construction’.

Property owners and their advisers must know and understand the construction of the property and pass this information to the insurer to make sure the policy is adequate.

This is where the surveyor’s report can really help, whether it be a full homebuyer report commissioned by the purchaser or via the mortgage survey/valuation – both should provide details of the construction materials.

The construction method is not always obvious either – new materials are often designed to look like traditional bricks and mortar for example but can be a plastic or concrete skin over render.

High value, exceptional properties

At the high net worth (HNW) end of the scale, the affluent home owner will more likely live in the home they desire rather than the house they can afford.

The ability for architects to create elaborate bespoke properties to order never ceases to amaze.

It is also common place for modern construction methods to be fused with longstanding or even listed properties such as a churches or derelict factories, transforming the once traditional into ultramodern high-end residences, containing cutting edge amenities and technology.

The architectural interest and rarity of a high value or prestige home might derive from the very fact of its nonstandard construction.

In the use of expensive imported materials – such as marble, for example – or the innovative building techniques used to achieve the finished eye-catching effect, your high value home might boast the fact that non-standard construction is featured.

Yet “non-standard”, sets alarm bells ringing for many ordinary home insurers.

Many volume markets will actively avoid what they see as difficult to cover nonstandard construction in favour of the simple vanilla properties.

Cover may be declined or offered at a heavy premium and these clients can often struggle to find the cover needed to adequately protect these exceptional properties.

Brokers who are aware of the risks of ‘the wonderful and the unusual’ and that have access to a good GI provider, can offer valuable guidance to these clients.

The Financial Conduct Authority (FCA) said it was concerned that some pricing policies harmed consumers, particularly the vulnerable.

It said it has already found some firms were not complying with rules about the information customers should receive when renewing their policies.

The FCA has written to CEOs of insurers saying it expects them to treat all customers fairly, whether they are new or long-standing.

Last month Citizens Advice called for an end to practices resulting in loyal customers being “ripped off”.

Andrew Bailey, the FCA chief executive, said: “Our initial work has identified a number of areas of potential consumer harm. We want to make sure that general insurance markets deliver competitive and fair prices for all consumers. This market study will help us examine the outcomes from general insurance pricing practices and inform how, if necessary, we should intervene to improve the market.

“If change is needed to make the market work well for consumers, we will consider all possible remedies to achieve this.”

According to GoCompare, 65% of drivers renewed their car cover with their existing insurer in the last 12 months and 38% said they did so out of loyalty to their insurer.

Georgie Frost, consumer advocate at GoCompare said: “We welcome any investigation into this area because clearly something isn’t right and people feel they are being ripped off. Clearer rules and regulations will be better for everyone because we can’t have a system where it is the most vulnerable that are the hardest hit.

“It’s well-known that loyalty doesn’t pay when it comes to insurance. Just a glance at the feedback we receive from our customers shows that you can save hundreds of pounds on a policy without compromising cover.

“It’s imperative that people keep shopping around and switching to avoid getting ripped off, but more also needs to be done to make it clearer how customers can switch.”

The super complaint covers five key markets including mortgages, mobile, broadband, home insurance and savings with eight out of ten consumers affected by the “loyalty penalty” in at least one market, asserts the paper.

CA research suggests each household is being penalised £877, or three per cent of its annual household expenditure for staying with providers.

The 76-page super-complaint revealed of the five sectors, mortgage customers are the least likely to be penalised with 10% suffering for loyalty against 47% of home insurance or 43% of broadband customer. However, of the average household spend of £3,671 a year on the five services, the mortgage and protection spend is the highest at £2,527, according to research.

Independent government department, the CMA has confirmed it will investigate and publish a response within 90 days, or before the end of the year.

Possible outcomes include making recommendations to government to change regulation, action by sectoral regulators, taking enforcement action, launching a further market study or deciding no action is required.

Daniel Gordon, senior director at the CMA said: “We will now carefully consider the concerns raised by Citizens Advice, and any further evidence on this issue.”

A super-complaint, as defined in section 11(1) of the UK’s Enterprise Act 2002, is a grievance concerning the actions of a UK market for goods or services that are ‘significantly harming the interests of consumers.’

The national charity CA lodged the complaint with the hope of triggering a series of market investigations into the widespread overcharging of customers who stay with providers and identified that older or vulnerable customers were most often at risk.

Citizens Advice chief executive Gillian Guy said: “It beggars belief that companies in regulated markets can get away with routinely punishing their customers simply for being loyal. As a result of this super-complaint, the CMA should come up with concrete measures to end this systematic scam.”

Price capping

The charity outlined the difference the government’s price cap has made in the energy market which will shortly bring down household bills by an average of £75 a year.

CA analysis showed that excessive prices for loyal customers can be just as high – if not more so – in other markets.

In one example, Citizens Advice helped an elderly couple in their 90s whose daughter went to the charity after finding her parents were paying nearly £1,000 a year too much for home insurance after staying with a company for six years.

The CA said it recognises there is no one-size-fits-all solution, but Guy added: “It’s completely unacceptable that consumers are still being ripped off for being loyal to companies they rely on every single day.

“The loyalty penalty is clearly unfair – 89% of people think it is wrong. The CMA needs to act now to stop people being exploited.”

This is the fourth super-complaint to be lodged by the charity since it gained its power in 2002, which has a record for success on past super-complaints including doorstep selling, payment protection insurance and cold-calling, resulting in changes to the laws governing each sector.

Its complaint on payment protection insurance (PPI) in 2005 has helped return at least £32.2bn to customers in refunds and compensation.

The CMA is inviting interested parties to provide any evidence which may be useful to its assessment.