Insurer bosses vow to stamp out unfair pricing

Insurers have vowed to step up to combat unfair pricing.

It comes following the FCA’s publication of its thematic report detailing the dramatic industry-wide pricing failures in home insurance that has led to significant customer detriment.

On announcing the terms of a market study to be conducted into home and motor insurance, the FCA also sent a letter to leading insurer chief executives highlighting problems with the control of pricing practices, dual pricing and discriminative pricing of groups derived from protected data. 

The FCA says addressing these issues must be a priority, and insurer bosses have been having their say.

Insurer response

RSA UK chief executive Steve Lewis said the insurer was committed to guiding principles on premium differences agreed by between the ABI and fellow insurers in May this year.

“We are committed to ensuring those principles are fully reflected in how we engage with our customers every day,” Lewis said.

“RSA puts customers at the heart of our organisation, and we are committed to working continuously to improve customer experience and outcomes.

“As a customer centric organisation, we always try to take action if we feel customers have been treated unfairly, and we’re committed to continuing to do that.”

Direct Line has similarly reaffirmed its commitment to the ABI’s guiding principles, and the insurer said it was looking forward to working with the FCA on the study.

A spokesperson said Direct Line had already started taking steps to ensure loyal customers were treated fairly.

They added: “We know that shopping around brings great benefits to those who do it, but it does create differences between new customer premiums and subsequent renewal premiums.  

“Premiums should not keep rising continuously for no reason and over the last few years we have been actively reviewing the accounts of our long-term customers.

“Many of those customers have already seen their renewal premium either frozen or reduced.”

Allianz general manager of commercial and personal Simon McGinn echoed the comments of other insurers on the guiding principles.

And he added: ”We continually look at our processes and policies surrounding our pricing decisions to make sure we are always putting our customers’ interests at the forefront of everything we do.”  

AXA executive managing director Gareth Howell added: ”Ultimately we want to ensure that the market works as well as possible for all our customers.

”We do recognise that such a competitive motor and home insurance market means lower premiums for many but that for some, long-standing ones this is not the case.

”That is not acceptable and it is crucial that insurers work closely with the FCA to address and resolve this issue and help build consumer trust.”

Support

The ABI has added its weight to supporting the FCA study.

Director of regulation for the ABI Hugh Savill said he agreed with the FCA that the market is not working as well as it should for loyal customers.

He added: “This is an important issue and insurers will work with the FCA to address issues raised in the report to ensure that the market works as well as possible for all consumers”.

But EY head of insurance regulation Steve Southall said the message in the letter to insurer chief executives demonstrated even if bosses were looking to rectify dual pricing now, that past treatment of customers would be addressed in the study.

“Of key concern for the industry is the FCA’s assertion that they could consider taking further action where appropriate even if firms address the types of poor practice identified,” said Southall.

“Firms will need to undertake a comprehensive review of their pricing frameworks from a customer perspective and, critically, be able to prove that they have treated customer fairly.”

Warning

But other industry players have said the plague of dual pricing will not be easily removed from insurance.

MoneySuperMarket editor-in-chief Tom Flack supported the FCA’s action, but warned the study was no “silver bullet” to solving the issue.

“It’s an issue that has been prevalent in the insurance market for years and needs to be addressed sooner rather than later,” Flack said.

“But there’s no ‘one size fits all’ approach and even if any new measures were embraced enthusiastically by insurers, it would not bring down bills overnight. People shouldn’t get lulled into a false sense of security that this is some sort of silver bullet.”