General Insurance Pricing Rules: ICOBS 6B and What the FCA Found

The FCA’s general insurance pricing rules are among the few conduct interventions where the regulator has published a full evaluation of whether its own remedy worked. The rules sit in ICOBS 6B and they ended the practice of charging loyal customers more than new ones in home and motor insurance. The evaluation, published in July 2025, shows the effect was real but considerably smaller than the FCA predicted — and achieved partly through a mechanism nobody advertised.

What the rules actually say

ICOBS 6B applies to firms setting renewal prices, the price of additional products at renewal, or remuneration at renewal, for home or motor policies sold to consumers (ICOBS 6B.1.1R). It extends to subscription policies where the price increases during the term (6B.1.2) and excludes group policies that include or are sold alongside home or motor products (6B.1.3R).

The central obligation is one sentence. ICOBS 6B.2.1R(1): a firm must not set a renewal price that is higher than the equivalent new business price. The test applies at the point the renewal notice is prepared (6B.2.1R(2)).

The detail is in how “equivalent” is constructed. Firms must assume the customer used the same channel as when they first bought the policy, with fallbacks where that channel no longer exists (6B.2.5R). Individually negotiated new business discounts and qualifying cash incentives must be taken into account (6B.2.9R and 6B.2.16R). Where products are bundled, the test applies to each element and to the bundle (6B.2.2R) — so a firm cannot comply in aggregate while breaching on a component.

Tenure discrimination is a separate prohibition

Beyond the price test, ICOBS 6B.2.39R requires firms not to systematically discriminate against customers based on their tenure, and the guidance at 6B.2.40E(1) states that prices for longer-tenure customers should not systematically exceed the new business price for new business customers.

This matters because it catches indirect routes to the same outcome. A firm could technically satisfy the renewal price test on each individual policy while still running a pricing model that produces worse outcomes for long-standing customers in aggregate. The tenure rule closes that.

The obligations that are easy to miss

Three record-keeping rules apply. Firms must make and retain written records of how they avoid tenure discrimination (6B.2.51R), records of any arrangements treating existing customers as new business customers (6B.2.52R), and records setting out the basis of compliance and how any ambiguities were resolved (6B.2.54R). ICOBS 6B.2.58 reminds firms of the wider SYSC record-keeping obligations.

That third one deserves attention. Recording how you resolved an ambiguity is an unusual requirement: it obliges a firm to document its own interpretive reasoning, which means a supervisor can later test the reasoning rather than only the outcome.

And there is an obligation that surprises firms when they find it. ICOBS 6B.2.45R requires a firm to notify the FCA if it becomes aware that another firm in the distribution chain may not be complying. That is a duty to report your own distribution partners. Separately, 6B.2.46G suggests — under Principle 11 — notifying the FCA of material changes to pricing models that risk customer harm.

What the FCA found when it measured the result

Evaluation Paper EP25/2, published in July 2025, compared prices before and after the intervention. The numbers are worth setting out, because they are not the story the rules were sold on.

Existing customers — the people the rules were designed to protect:

• Home: average price £272.02 before, £271.53 after — essentially flat
• Motor: rose £22.71, from £437.48 to £460.19

New business customers:

• Home: rose from £176.64 to £222.36
• Motor: rose £111.14, from £458.24 to £569.38

So the gap between new and existing customers narrowed in home insurance, from £95.38 to £49.17 — but it closed principally because new business prices rose, not because renewal prices fell. In motor the gap widened, from £20.76 to £109.19, which the FCA treats as a positive outcome given the risk profiles involved.

On switching, measured by attrition as a proxy, home attrition fell from 26% in 2020 to 25% in 2022 and motor attrition rose from 39% to 40%. Attrition rose among low-tenure customers and fell among high-tenure ones.

The savings, against the forecast

In motor the average price reduction attributable to the intervention was £6.63 per policy, a statistically significant result. The FCA estimates the ten-year saving at £1.59bn on a central estimate, within a range of £163.2m to £3.02bn — roughly £184.9m a year.

In home insurance, no statistically significant effect was found, so no monetary saving was estimated. The FCA adds a caution worth repeating: this should not be read as evidence that the intervention made home insurance consumers worse off overall.

Set against that, the original cost-benefit analysis had estimated a £4.2bn saving across home and motor over ten years. The central realised estimate for motor alone is a little over a third of that, with home unmeasurable.

The honest reading is that a widely praised intervention produced a measurable but modest benefit in one market and no demonstrable effect in the other, and that the regulator published the finding rather than burying it. For anyone training staff on conduct regulation, that is a more instructive case study than a success story.

Why this is a competence issue

Compliance with ICOBS 6B is not a matter of following a price rule. It requires constructing an equivalent new business price including channel assumptions, discounts and incentives; testing bundles at component and package level; demonstrating the absence of systematic tenure discrimination across a portfolio; documenting the methodology and the resolution of ambiguities; and monitoring other firms in the distribution chain closely enough to know when to report them.

Those are actuarial, analytical and governance judgements, documented to a standard a supervisor will test. The pattern is the same one running through recent conduct reform — see our guide to MCOB after the Mortgage Rule Review, where a mechanical trigger was replaced by judgement, and to the Consumer Duty, which now sits over all of it. Our CPD course library covers the conduct, pricing and governance foundations these obligations assume.

Frequently asked questions

What exactly does the renewal price rule prohibit?

ICOBS 6B.2.1R(1) prohibits setting a renewal price higher than the equivalent new business price, tested when the renewal notice is prepared. The equivalent price assumes the customer used the same channel as at first purchase and must take account of individually negotiated discounts and qualifying cash incentives.

Does it apply to insurance other than home and motor?

No. ICOBS 6B applies to home and motor policies sold to consumers, with subscription policies caught where the price rises during the term and group policies sold alongside home or motor products excluded.

Can a firm comply on the bundle but not the parts?

No. ICOBS 6B.2.2R requires the equivalent new business price test to be met for each element and for the bundle, so compliance in aggregate is not sufficient.

Is there a duty to report other firms?

Yes. ICOBS 6B.2.45R requires a firm to notify the FCA if it becomes aware that another firm in the distribution chain may not be complying.

Did the rules actually reduce prices?

Partly. The FCA’s July 2025 evaluation found a statistically significant average reduction of £6.63 per motor policy, with a central ten-year saving estimate of £1.59bn, and no statistically significant effect in home insurance. The original cost-benefit analysis had projected £4.2bn across both markets.