Breaking down … the hidden cost of cover.

Policy renewal letter did not mention annual premium increase, says one customer, despite it being mandatory 

The RAC has been accused of sending out breakdown cover renewal letters with an undisclosed 37% increase in premiums, despite new rules that force insurers to display annual price rises.

Since 2017, insurers have been required to tell consumers in renewal lettershow much they paid the previous year to encourage them to shop around. At the time the measure was introduced, the Financial Conduct Authority (FCA) said it would “transfer £100m from firms’ profits” into consumers’ pockets.

But Guardian Money reader Scott Berry contacted us this week to ask why his RAC renewal letter had not included his previous payments. His letter said his road rescue service would cost £22.72 a month from 30 January. Only when he dug out the previous year’s equivalent did it emerge that he had been paying £16.54 a month – meaning the RAC had snuck through a 37% increase.

The Maidenhead resident says he can see no reason to justify the rise given that he has not claimed in the intervening year. Berry, an RAC customer for more than six years, says he wasn’t surprised, as firms are looking to “take advantage of customer loyalty or inertia”.

The RAC says that when the FCA made insurers tell customers what they had paid the previous year, it only applied to annual policies, not Berry’s, which can be cancelled at any time.

The FCA told Money that while the RAC is not technically breaking the rules, it would be “speaking to the firm about this matter”.

Berry says: “I’m surprised it isn’t considered a breach of the FCA rules as nowhere in the letter does it state previous premiums.

“I guess the RAC and the private equity firms behind it can afford the lawyers to ensure they’re doing the bare minimum to comply even if it’s against the spirit of the rules.”

The RAC told Money that it “fully complies” with the FCA’s guidelines, adding that the 37% rise was fair.

“He has received significant discounts in the past and, as a result, was starting from a lower premium, which is why the increase appears steeper,” the RAC says. “But we welcome the opportunity to talk to members if they are unhappy.”

This is not the first time the RAC has been accused of failing to comply with the rules. In April last year, the FCA told the RAC to contact 1 million customers after finding the firm had failed to prominently display the previous year’s premium in renewal letters.

At the time, the FCA’s Jonathan Davidson said: “It is unacceptable to see some firms are not transparent with customers a year on from the introduction of the rules.”

Berry has now agreed to keep his RAC cover and is paying £13.40 for 11 months – more than £100 less than the RAC quoted originally.

Driving to Europe after a no-deal Brexit

The Association of British Insurers is warning holidaymakers taking their car to the continent after 29 March that they will need to apply to their insurer for a green card in the event of a no-deal Brexit.

Green cards will have to be carried as proof of insurance under EU regulations. The ABI has advised drivers to allow up to a month before they travel to get one. Those leaving the UK without one may be breaking the law. The same requirements will apply to EU motorists travelling to the UK, it says.

Anyone taking their car to France over Easter could be affected, as may those going across the Irish border in either direction. Although an agreement between the relevant European insurance authorities was made in May 2018 to waive the need for green cards in the event of no deal, this has not been confirmed by the European commission, hence the industry is planning on the basis of green cards being required.

Uncertainty also surrounds the European Health Insurance Card (EHIC) in the event of a no-deal Brexit. The ABI says travel insurance policies will continue to be valid.