Consumers in the United Kingdom seem to be at the mercy of their own insurers. Hidden within the close print of the renewal notices is the true cost of renewing the insurance, often as much as a 100 percent increase. This is despite the fact that there have been no claims on the insurance and the value of the automobile may in fact have fallen since the previous year. Unwittingly, consumers have signed up to continuous payment authorities. In effect this means that the consumer has agreed to continue to buy the insurance year on year, regardless of any price increases, unless they contact the insurer and cancel it. If only cancelling were that simple. If the consumer fails to read the small print properly, they may be hit by a cancellation fee. With higher percentages of consumers checking insurance quotes on comparisons sites, insurers still take a chance on inertia when the customer receives their renewal notices. Insurers seem to rely on the fact that a certain percentage of consumers do not bother to read the documents, and if they do, they do not readily notice that the price is far higher than the previous year.The United Kingdom’s Financial Conduct Authority, responsible for dealing with disputes arising out of financial services, receives around 500 complaints a year. However, this is just the tip of the iceberg. In response to the bad publicity the practice has had in the media, the Association of British Insurers (ABI) has proposed that renewal letters should state the amount that the consumer paid last year alongside the renewal price for the coming year. The suggestion has yet to be adopted. Source: Rupert Jones, “Insurance Body Calls for ‘Easy Comparison’ Renewal Quotes,” The Guardian, July 10, 2014,

http://www.theguardian.com/money/2014/jul/10/insurancecar-home-renewal-quotes-premium.

1. Discuss what it is about the competitive environment of the insurance industry that might allow this type of practice.

2. Debate whether technology and access to comparison websites means that this type of practice is doomed.