Citizens Advice Super Complaint Could Cause Contents Insurers Big Problems

Reaction across the industry shows that the Citizens Advice super-complaint to the Competition and Markets Authority, over the penalties loyal customers face in terms of higher premiums has the potential to create a major problem for the industry.

At the same time the FCA announced its own investigation into the way loyal customers are effectively paying more each year than the moneysaving expert type switeroos. Of course, everyone knows that by switching you get a cheaper deal for a year, maybe two. It’s not just Buildings and Contents, it’s the same story with motorcycle, car, van, gadget, racing bicycle, or annual travel insurance too.

The downside of all this could be a raft of PPI style claims, which rumble on for years and add expense for every future policyholder. Here’s a round-up of the reaction we have spotted today:

Gary Dixon, the Chairman of the Association of Independent NonExecutive Directors (www.AssociationINed.org.uk) and himself a previous non-executive chairman of two insurance companies plus a major independent pensions firm, said:

“Anyone only has to look at the track record of what ensues from such super-complaints to understand that they all have serious and profound effects on the markets. Citizens Advice do not bring these wily-nilly. They research long and hard to ensure that their cases are ironclad and will result in significant insurance market change.

“If I was on the board of an insurer, I would see this as a warning beacon prompting me to look very carefully at how my firm’s policies and working practices may stand up to the harsh spotlight of external criticism as there will be plenty on the way.

“One only has to look at the massively disproportionate fall-out from the PPI scandal over the last decade to see the downsides that can ensue. Bear in mind that PPI exploded as a problem specifically because of the super-complaint that was originally brought.

“My advice to the Chair of any board in the insurance sector is to look very, very carefully at the policies driven by the board and the composition of the board itself. Does the board contain someone sufficiently independent to stand up for the rights of the consumers and ensure that changes are made? After all, any such changes now should help avoid the potential downsides of future compensation and redress.”

ABI calculation on insurance

ABI Comment

Responding to news Citizens Advice has named home insurance as one of the products it believes is unfairly penalising loyal customers, ABI Director General Huw Evans said:

“In any market where there is regular switching and fierce competition for new business, good deals are available to those who shop around but this does mean long-standing customers can lose out. The insurance industry recognises this is a problem and earlier this year became the first and only sector to take voluntary, industry-wide action to tackle it. This includes commitments from firms to review premiums charged to customers who have been with them for five years and the industry publishing a report on progress within two years.

“In a competitive free market, where three out of four people shop around, there is no easy fix available and these measures will take time to bed in. But we believe that these industry commitments are a positive step in tackling excessive premium differences that can unfairly penalise long-standing customers.”

UK Finance Comment to the BBC:

Banking industry group UK Finance said it would “carefully consider the issues raised by Citizens Advice”.

Eric Leenders, managing director of personal finance for the body said: “We would always encourage customers to shop around and find a deal that best suits their needs and we will continue working with the regulators to make this as easy as possible, including through standard terms and price comparison tools.”

 

 

 

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