Brokers ’very much part of the solution’ following FCA pricing report says Biba

The British Insurance Brokers Association (Biba) has welcomed the FCA’s pricing practices report, published today, advocating that ”brokers [are] very much part of the solution”.

In the report, the FCA has put pressure on firms to offer the same price to both new and renewing insurance customers.

The Association of the British Insurers (ABI) has also backed the proposal.

While Biba supports the FCA’s desired outcomes of enhanced competition and long-term fair value for customers, the ABI agrees with the FCA that both the household and motor insurance markets do not work as well as they should for all customers. 

Part of the solution

Biba believes that although brokers are not responsible for setting prices, they are very much part of the solution.

In a statement, Biba said: “The focus on equalising renewal premiums with new business prices reflects the concerns already raised and it is pleasing that the regulator recognises the good work that has already been achieved through market collaboration, particularly by the application of the Biba [and] ABI General Principal and Practices on Pricing (GPAPs).

”The level of awareness of GPAPs is currently at 89% among Biba member firms, which have long been keen to reduce the practice of dual pricing and have combatted it by either routinely re-broking or doing so if the price has increased.”

Biba said that it was pleased that the regulator has agreed that for many customers auto renewal is of value as it can be an essential safety net for vulnerable customers if it is managed appropriately by the provider.

However, brokers are “typically closer to their customers than insurers”. In this sense, brokers are key in explaining how automatic renewals work and how customers can cancel if the product is not right for them.

Steve White, chief executive of Biba, said: “Our broker members always aim to offer their customers insurance that meets their needs both in terms of price and cover. Their long-held concerns about dual pricing will be addressed by the FCA’s proposed measures and we look forward to working with the regulator constructively.

”The report is broad, [and] alongside the ultimate aim of fairness, it touches on addressing inequitable Most Favoured Nation clauses following the results of the Competition and Markets Authority enquiry and on firms using innovative solutions to compete.

”Brokers are by their nature innovators; they will continue to use their entrepreneurial approach to be the ‘go-to’ business for customers seeking fair and good value insurance.”

Success metrics

As a measure of success, the FCA has indicated that less switching due to fairer longer-term pricing would be demonstrative.

However, Biba pointed out that price is not the only factor to be considered when purchasing insurance.

It said that while there may be less switching, brokers will be reviewing the market for their customers at renewal to see if there may be a more suitable alternative to their existing policy.

Meanwhile Huw Evans, director general of the ABI, said: “Insurers and brokers have already begun to tackle the issue of excessive price differences between new and existing customers through an industry initiative that has seen over 8.5 million pricing interventions across home and motor insurance, worth £641 million.

“It is vital that price comparison websites and insurance brokers are subject to the same level of supervision and monitoring by the FCA to ensure a balanced approach.”