Economy

Why six million insurance policyholders are not getting a good deal

Why six million insurance policyholders are not getting a good deal”

"That includes people who have been with the same insurer for years".

FCA Executive Director of Strategy & Competition Christopher Woolard added: "This market is not working well for all consumers".

The report makes grim reading, the key finding being that 6m customers pay high prices and many loyal customers are not getting a good deal.

David Williams, managing director, underwriting & technical services, AXA Insurance (UK), said: "Like the FCA, we believe that transparency is crucial and technology can play a role in tackling the issue of dual pricing". "We expect the industry to work with us as we do so".

In September 2018, Citizens Advice made a "super-complaint" to the Competition and Markets Authority (CMA) over loyalty pricing in five markets, one of which was home insurance. The FCA said it launched the study because it was "concerned about the potential harm to consumers from pricing practices". The most significant are: "restricting or banning pricing optimisation linked to how likely consumers are to renew, require automatic switching to lower priced products offering the same level of cover and banning auto renewal or making it opt-in only".

Other potential remedies under consideration include restricting the way that firms use automatic renewal, which could discourage switching.

Insurance firms will also have to publish information about price differentials between customers.

The insurance industry knew it was coming - but was it truly ready for the extent of the FCA's interim report into its market study on general insurance dual pricing?

A final report from the FCA is scheduled for the first quarter of next year.

Make firms be clear and transparent in their dealings with consumers - including improvements to the way firms communicate with their customers.

The regulator said it was keen to harness the benefits of innovation so that general insurance markets benefit positively from technological developments.

While the report may have appeared damning to the insurance industry, several chose to see the cup half full and focused on the positive signs that appear to be emanating from the FCA's earlier actions.

It claims that most firms, when setting a price, include their expectations of whether a customer will switch or pay an increased price.

"At the moment these are just proposals. The FCA must now follow through on these bold ideas to stop loyal insurance customers being penalised". "It is important that any unintended consequences are carefully considered to ensure that a fair and balanced approach is achieved for all customers".

The Association of British Insurers said it agreed that home and motor insurance markets could work better for customers who do not shop around at renewal, and that it would work with the regulator on the issue.

Longstanding customers pay more on average, but even some people who switch pay higher prices, it said, while those with lower financial capability, on incomes below £30,000 and who bought combined contents and building insurance often paid more.

Similarly, James Blackham, CEO and co-founder of By Miles, is in support of the FCA's efforts although he pointed out that "time is running out for the regulator to make meaningful change".



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