Industry reacts with serious concerns amid FCA’s ‘tough, tough’ pricing crackdown

The insurance industry has reacted with some serious concerns to the FCA’s ‘tough, tough’ crackdown on pricing revealed today.

The FCA today released its interim report on its market study into pricing, revealing a range of remedies it is considering which will have a huge impact on insurers, brokers and service providers.

PwC UKGI leader Mohammad Khan said: “Potential remedies to pricing and renewal processes can impact the industry hardest.

”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.

“Some of the proposed remedies are likely to shake up the industry, the FCA recognises supply side remedies are likely to create winners and losers  but seem to be willing to take such risk and monitor the situation closely once the remedies are in place.” 

PwC partner Jane Portas said: ”After a long wait, the range and depth of potential action will be a worry for the industry. The FCA calculates 6m consumers are getting a bad deal with a cost of £1.2bn annually if they were to pay average premiums. This is more than enough to justify tough tough proposals. ” 

Price rise concern

Aston Lark chief executive Peter Blanc understood the FCA’s desire to protect vulnerable customers, but said he was concerned about price rises. 

”Over the last twenty years insurers have lost money overall on personal insurance - there aren’t super profits being made in the market as a whole. As such, any proposal that forces premium reductions for a significant group of customers (the FCA mention 6 million customers) will inevitably mean price rises for a different group of customers, typically those that do shop around,” he said.

Blanc stressed both insurers and trade bodies have been working hard to fix the issues  and needed more time. 

”The ABI and BIBA initiative to reduce dual pricing hasn’t been given much time to filter through so I’m concerned that this could be taking a sledgehammer to crack a nut.

“Many insurers are already responding by creating products that reward loyalty and I think that’s a great solution - make it a customer proposition whereby customers can choose insurers that reward loyalty. Other customers might prefer the annual merry go round of shopping - it’s a very dynamic and competitive marketplace,” he said.

”It’s also worth remembering that many customers are actually very happy to stick with their existing insurer and they believe in loyalty.”

AXA UK underwriting chief David Williams said: “Like the FCA, we believe that transparency is crucial and technology can play a role in tackling the issue of dual pricing. We will give the regulator our feedback on its proposals.

”Our focus will be on avoiding unintended consequences and making sure remedies fully benefit consumers. We believe any solution needs to be driven by the whole market.”

GoCompare chief executive Lee Griffin said:  “We welcome this update from the FCA. 

”The proposals, if implemented, will go some way towards increasing transparency for consumers and encourage more shopping around and switching.

”The proposals also call on the industry to stop raising prices for those customers that auto-renew year after year, which could help protect the most vulnerable and those worst affected by the so-called loyalty penalty.”