The UK's Financial Conduct Authority's (FCA) concern that general insurance pricing practices 'could potentially harm consumers and the vulnerable' has prompted it to launch a market probe.
The study will provide a "deeper understanding" of the scale of any harm to consumers from general insurance market practices, who it affects and what actions are required to improve the situation.
Alongside the market investigation, the FCA has published a discussion paper on fair pricing in financial services markets. The discussion paper sets out the FCA's approach to considering fairness of pricing in general.
The FCA said it wants to hear views from stakeholders to inform the judgment of when pricing is unfair in financial services markets. These views will also inform the market study.
The regulator is also seeking input on the issues discussed in the market study's terms of reference and evidence by 3 December 2018.
It aims to publish its final report and, where required, proposed remedies by the end of 2019.
The FCA is seeking input to the discussion paper on fair pricing and accompanying evidence by 31 January 2019.
The regulator also revealed potential non-compliance by some firms of its transparency rules at renewal. To address this, it vowed to "explore all options to address this using the full range of its powers".
FCA chief executive Andrew Bailey said: "Our initial work has identified a number of areas of potential consumer harm. 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."
Industry reaction
Hugh Savill, director of regulation at the Association of British Insurers, welcomed the FCA's actions, noting "the market is not working as well as it should for some long-standing customers".
Iain Brown, head of data and science at data analytics provider, SAS UK & Ireland, said insurers need to do more to ensure their pricing is accurate and without the proper governance structures in place, models can be flawed.
He said: "As artificial intelligence becomes more readily available, insurers can use it to make sure their pricing is as fair as possible."
A link to the FCA's general insurance pricing practices study can be found here. The link to the discussion paper on fair pricing in financial services can be found here.
Companies:Financial Conduct Authority