The loyal customer's renewal price
Marcus, aged 78 and hard of hearing, has held motor insurance with Brentwood Insurance for nine years. His renewal notice quoted £640 and the policy auto-renewed on 1 February. Brentwood's equivalent new-business quote for an identical risk was £410. Marcus telephoned on 20 January to query the increase; he was on hold for 45 minutes, gave up, and later said he could not follow the recorded options. He complained in writing. Brentwood's final response, dated 1 March, said the premium reflected his risk profile and was 'a commercial matter for the insurer'. It did not mention the Financial Ombudsman Service or any time limit for referring the complaint. Marcus referred the complaint to the Ombudsman on 20 September. The policy also carries a £75 administration fee for mid-term adjustments and a £250 excess. Brentwood accepts that the renewal price was not compared with its new-business price at the time.
1. Assess whether Brentwood's renewal pricing complied with FCA requirements. Refer to the price-walking rules and the Consumer Duty.
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Price-walking rules. Since 1 January 2022, FCA rules require that a renewal quote for home or motor insurance must not be higher than the equivalent new-business premium the firm would charge for the same risk. Brentwood accepts the risks were identical and that it did not compare. Quoting £640 against a £410 new-business price is therefore a breach of the pricing rules, unless Brentwood can show a genuine risk difference, which it cannot.
Consumer Duty. The firm's obligations under PRIN 2A are also engaged:
- Price and value: the renewal price must represent fair value. A 56% loyalty premium for an identical risk is difficult to justify.
- Consumer understanding: renewal communications must be clear and must explain the auto-renewal and the premium. The recorded options were not accessible to Marcus.
- Consumer support: a 45-minute hold and an inaccessible phone system are inconsistent with the support outcome.
- Vulnerability: Marcus's age and hearing difficulty should have triggered reasonable adjustments, such as written communication, a callback, or a named contact.
Other points. The £75 administration fee needs its own fair-value assessment. Brentwood should also check that the renewal notice disclosed last year's premium, the new premium and the auto-renewal, as required.
2. Can the Financial Ombudsman Service consider Marcus's complaint, given that he referred it on 20 September? Explain the time limits and the effect of the final response.
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The normal time limits. Under the FOS rules (DISP 2.8), the Ombudsman will not normally consider a complaint if it is referred more than six months after the firm's final response, or more than six years after the event (or three years from when the complainant knew or ought to have known about it).
Applying them. The final response is dated 1 March and the referral is 20 September, which is outside six months. However, the six-month limit operates only where the final response contains the information the firm is required to give: that the complainant may refer the complaint to FOS and that there is a six-month time limit (DISP 1.6.2). Brentwood's final response said neither. On those facts, FOS is likely to treat the complaint as in time, or at least to exercise its discretion to consider it. The complaint is also within six years of the renewal.
Practical point. Brentwood should not simply assert that the complaint is out of time. It should cooperate with FOS, provide the file, and explain the pricing and vulnerability issues. A refusal based on a defective final response is likely to damage the firm's position and may itself be a conduct issue.
3. What redress and other actions should Brentwood now consider, taking account of Marcus's circumstances?
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Redress.
- Refund the difference between the renewal premium and the equivalent new-business premium: £640 − £410 = £230.
- Add interest. FOS typically awards simple interest at 8% per annum from the date of payment to the date of settlement.
- Consider whether the £75 administration fee was fair value and whether any mid-term adjustment fee was charged to Marcus; if so, review it.
- If Marcus incurred costs (for example, telephone charges or time off work), consider a modest additional award.
Vulnerability and support. Brentwood should record Marcus's hearing difficulty, offer written or email communication, provide a named contact and a callback, and review whether its call system and hold times meet the consumer support outcome. It should consider whether other customers in similar circumstances were affected.
Root cause and remediation. The pricing breach is likely to affect other renewing motor customers. Brentwood should conduct a review, remediate affected customers, correct its renewal processes and consider whether the matter is reportable to the FCA. It should also review the final response template, which failed to include the FOS information.
Jurisdiction. The amount is well within the FOS award limit of £430,000 for complaints referred on or after 1 April 2023, so FOS can make a binding award if the complaint is upheld.