The UK regulator will investigate home and motor insurance pricing practices after a preliminary review highlighted a range of problems.

Concerns around a lack of transparency and so-called "loyalty penalties" have sparked the action. Similar issues have been raised in Australia, with consumer groups regularly highlighting an alleged lack of openness over how premiums are calculated.

The UK’s Financial Conduct Authority (FCA) has written to insurance CEOs, launched a “market study” into general insurance pricing, and published a wider discussion paper on fairness of pricing in financial services.

The regulator says it is concerned general insurance pricing practices “have the potential to cause harm to consumers”, particularly those who are vulnerable.

“Our initial work has identified a number of areas of potential consumer harm,” CEO Andrew Bailey said.

“We want to make sure that general insurance markets deliver competitive and fair prices for all consumers.

“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.”

The FCA is seeking input to the discussion paper by the end of January, will publish an interim report during the UK summer and a final report by the end of next year.

The regulator says it is aware the industry is already acting on excessive differences between premiums charged to new customers compared with people renewing.

“The FCA will take into account any improvements made when considering potential remedies that may be required to make the market work well for consumers,” it says.

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