It’s said convenience is king, so it’s surprising to see that despite clear and straightforward guidance from the FCA, some insurance firms are still creating unnecessary hurdles for customers who wish to cancel or adjust a policy.

At TCC, we’ve noticed a trend where the simplicity of purchasing new products or adding extra options is not matched by the ease of making changes or cancellations. This imbalance not only frustrates customers but also undermines the trust and transparency that should be at the heart of every insurance transaction.

The regulator is quite clear that unnecessary barriers are unacceptable, and in principle, it should be just as easy to cancel a product as it is to buy one. Its handbook states:

ICOBS 6A.6.4R01/01/2022

1. The methods provided by a firm in accordance with ICOBS 6A.6.3R must include at least all the methods by which a consumer is able to purchase a new policy with the firm.
2. A firm must consider the needs of its customers when determining what cancellation methods it provides.

ICOBS 6A.6.5G01/01/2022

An easy and accessible method for cancelling an automatic renewal feature is one that does not place any unnecessary barriers on the consumer who uses it. Unnecessary barriers may include one or both of the following:

1. Unreasonably longer call waiting times to cancel the automatic renewal feature than to purchase a new policy; and/or
2. Unnecessary questions or steps before the consumer is able to confirm their instructions to cancel the automatic renewal feature.

Common issues

One particular feature which could attract negative regulatory scrutiny is the lack of ‘opt-out’ of automatic renewal, particularly with online options. Instead of enjoying the convenience of digital management, customers often find themselves navigating a maze of obstacles. They are required to endure lengthy waits on phone calls or in online chat queues, only to be met with retention tactics or the tedious task of filling out cancellation forms. These hurdles not only create frustration but also lead to unsatisfactory customer experiences and poor outcomes.

This approach of attempting retention is typical of service-type products where customers can easily buy ‘instantly’ but often face long 30–40-minute processes to cancel or reduce product content, including going through multiple handovers and sales pitches.

The inconvenience is sometimes compounded further still by a ‘drop off’ in calls and internal connections, with customers exasperatingly having to start from scratch.

Where the benefits of having online access are sold to the customer at the outset, customers will likely expect the online functionality to include the ability to cancel without the need to contact the insurer.

Firms must also consider the access needs of customers who may not benefit from or use online account access or contact methods and, in such cases, how quickly they can speak to a customer adviser. Therefore, it’s vital that target operating models ensure sufficient and comparable resources are available for customers to discuss their renewal as there are for new sales.

Pricing

In addition, TCC are noticing that customers are often offered reduced renewal costs at the point of retention, which is significantly lower than the renewal quote, despite the regulator being clear that the cost to the customer should be the best available.

TCC’s experts recommend that firms review ICOB 6 in line with the FCA’s expectations to avoid poor consumer outcomes and obtain feedback from customers about their renewal and cancellation experience.

Get in touch for a confidential discussion and free workshop for your firm to explore how TCC’s expertise can ensure you stay the right side of regulations.