Who is the best judge of a ‘good deal’ then?
On 22 September 2020, the FCA published its General Insurance pricing practices market study report. The two-year project explored thousands of policies and consulted with industry stakeholders in order to get to grips with the practice of price walking – where new customers pay cheaper premiums than renewing policyholders.
In light of its findings, the FCA has proposed a series of measures to mitigate price walking. This includes insurers providing data to demonstrate they are pricing policies fairly and increasing the transparency and methods by which customers can cancel auto-renewals.
Cited: Insurance Times
The FCA is right to stop the practice of offering lower prices to new customers at the expense of existing customers. Whichever of the multitude of persuasive reasons the industry advances to justify its ‘price – walking practices’ the reason does not cut the mustard with the public, or the best interests of the public. At a time when the public trust in the insurance industry is at an all-time low, and is in danger of descending below the water line, there is every reason to correct a practice that by any reasonable expectation of fairness does not stand up to any professional scrutiny, at all.
Lee Griffin, chief executive and founder of GoCompare commented “A fifth of motorists currently don’t switch their policies at the point of renewal because they think it will be too much hassle. [Around] 6.7 million drivers are collectively wasting an estimated £1.9bn a year by allowing their car insurance to automatically renew without checking they are getting a good deal. Who is to say what a customer considers to be a ‘good deal’? What Mr Griffin is saying is that if 6.7 m drivers do not shop around, annually, he stands to make less money. That probably why he is not a fan of ‘auto renewals’.
A fundamental failure of the comparison site industry is its lack of comparison of value as distinct from price. The public are never going to be best served by any algorithmic model that compares the prices of products that are far from equal in value. Whilst the industry is complaining of increased claims costs, and premiums too low to meet them, at the same time, by Mr Griffins’ message, it is encouraging people to pay them less. The public sees through this. Moreover, when they have a claim and find that they have no choice of repairer or replacer of their property and then suffer from inadequate repairs, service or replacement only to be told by the insurer ( or third party insurers in some cases) that “it is not our legal responsibility- you must sue our supplier” the trust in our industry takes another dive. We cannot afford this.
Mr James Daley, the insurance sector consumer champion is ‘spot on’ when he says “Comparison sites will need to start demonstrating that they can do more for customers than simply serving them up prices.” The best interests of consumers and indeed all insurance policyholders is insurance contracts which they can understand are consistently priced, which they can afford and trust, implicitly.