The antidote to dual pricing? Sell the policy at the correct price

There is much anticipation of the FCA’s preliminary report into general insurance pricing practices due to be published next month, with the full report coming out in December. It is likely to be a landmark event for our industry.

Some providers have already taken action in advance of these findings, with some writing down as much as £300m and launching fixed price longer term deals to maintain customers at potentially long term costs to the broker.

The era of sub-net broking, where new business is a loss leader covered by higher renewal premiums, is hopefully passing, an outcome that will be applauded by all of us who care about the reputation of our industry.

Logically, renewal premium levels should be lower than new business costs because an underwriter should more fully understand the customer and the risk. 

Unless the customer has made a claim, or there’s been a fundamental change in their circumstances, prices should fall, apart from rises needed to reflect inflation.

But even changes of circumstances that affect a customer’s risk profile have pitfalls. A recent case study in the national press cited a customer whose motor premium increased after he was widowed. 

The insurer justified the increase because in their opinion single men are more likely to have an accident than married men. In this instance, the customer felt he was being punished for his bereavement. 

This could be considered as unfair and unjust – does this demonstrate a fixation with data and stats? Just take a second to think about this scenario from a customer’s view. Is the industry treating this customer in a fair and understanding way and as an individual? I think not.

In a recent customer survey we found that over 70% of our customers paid less on renewal than the previous year - it’s surprising that this is not the case with all brokers and insurers. 

Perhaps there is only one way to stop dual pricing; sell the policy at the correct price in the first place and focus on providing insurance that meets the needs of individual customers and is priced to match the risk factors and not a fictitious lifetime value. 

Sharon Beckett, Managing Director, Be Wiser