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Delivering fair value in a digital world
Martin Schultheiss
Chief Commercial Officer Uinsure
Earlier this year the FCA published its paper on pricing rules in the GI Market . This follows several years ’ work from the regulator to address the harms suffered by loyal customers of home and motor insurance providers .
New ruling
It has long been the case that regulated firms have a duty to treat their customers fairly , however , the work performed by the regulator has shown that in many cases this has not been delivered in the GI space . The most prominent change that the FCA brings in is that firms will no longer be able to slash new business premiums in order to attract new customers , only to penalise them in subsequent years with hugely inflated prices which bear little resemblance to the actual cost of providing the policy . This unfair profiteering has become known as ‘ price walking ’ and it will be banned from the start of 2022 , removing the need for customers to outwit insurance providers and move their polices year-on-year in order to get a fair deal .
Uinsure have never undertaken the practice of price walking and taken this moral standpoint ever since our inception in 2007 .
As we know , price is only part of the story and there is a raft of new rules on product
Price walking
The practice of artificially discounting new business premiums in order to attract new customers , only to penalise them in subsequent years with inflated prices .
governance which took effect in September 2021 , meaning firms must test the products they provide for ‘ value ’ on a regular basis .
Key considerations
There are some key considerations for distributors and firms as a result of the FCA ’ s recent moves . This will include having a clear understanding of GI provider panels value proposition and whether or not these providers have undertaken the practice of price walking your customers , who will probably have paid a financial penalty for their loyalty . In the case of legacy back books , there is also a strong likelihood that some customers will be holding policies that are outdated , have not benefited from product development and would not pass any of the tests the FCA has introduced .
The ultimate aim for the regulator is to create consistent pricing ; this may well mean the end of cheap deals in the first year , but it will bring about a more sustainable ongoing insurance bill for the customer , who will have a better idea how much their home insurance costs year on year .
What this means for advisers
For advisory firms , the new rules will mean that , as price will no longer be the sole representation of value , the profession can lead the insurance conversation without the traditional sensitivity on first-year prices . It ’ s a significant opportunity to reclaim intermediary market share from price comparison sites which had become more successful when new business pricing competition became artificially more aggressive .
To find out more visit : www . uinsure . co . uk Contact us : 0344 844 3844 enquiries @ uinsure . co . uk