Action by the members of BIBA (the British Insurance Brokers’ Association) and the ABI (Association of British Insurers) is benefiting long-standing customers, reveals a report published by BIBA today (10.07.20).
The two organisations launched a set of Guiding Principles and Action Points (GPAPs) to address the occurrence of excessive differences between new customer premiums and subsequent renewal premiums that unfairly penalise long-standing customers in motor and home insurance, and committed to reporting back on their effectiveness.
BIBA Broker members active in the home and motor insurance markets responded to a survey which revealed BIBA members to be highly engaged with GPAPs.
- There is an 89% level of awareness of GPAPs and most brokers welcome them.
- Brokers reported that insurers had made ‘great strides’ to bring new business and renewal pricing into line.
- Insurers are amenable to approaches by brokers to negotiate changes to offered renewal premiums for longstanding customers on individual cases.
- The vast majority of brokers either re-broke every year irrespective of price change or if there has been an increase in the premium (for home and motor insurance).
- Systems brokers have adopted to implement GPAPs are often aimed at more vulnerable customers. One respondent explained how it closely monitored the premiums of those aged more than 75 years.
- Brokers reported that system-generated renewal prices were monitored for increases and underwriters contacted about premium levels where appropriate.
Steve White BIBA CEO said: “Our members have embraced GPAPs and this is benefiting home and motor customers. In light of the success of this voluntary action by both brokers and insurers it is clear that the Financial Conduct Authority needs to note the positive impact of GPAPs.
“Brokers offer a holistic approach to their clients’ insurances considering the breadth of cover under a policy and the claims-paying history of the insurer before considering whether switching to obtain a financial saving is in the customer’s best interests. This care negates the need for auto switching which might instead cause customer harm.
“All customers are different and sometimes the safety net offered by an auto renewal process ensures continuance of motor insurance, required by law or home buildings insurance often necessary under a mortgage and the practice should be allowed to continue albeit on an opt-in basis.”
BIBA is pleased with the findings of its review into the effectiveness of GPAPs and will continue to work with the ABI and the FCA to ensure good outcomes for long-standing customers.
The ABI has also sent us some info;
The industry initiative to help improve outcomes for long-standing customers launched two years ago is having a positive impact according to the review of its implementation published today by the ABI (Association of British Insurers)
The Guiding Principles and Action Points for General Insurance Pricing (GPAPs) initiative was launched by the ABI and BIBA in May 2018 to help address excessive price differences between new customer premiums and subsequent renewal premiums. At the time, the insurance sector was the first industry to take positive, collective action to address the issue of long-standing customers.
Commitments include: prioritising better outcomes for long-standing customers at company board or senior management level; clearly communicating to customers that renewal premiums may be higher, reviewing their approach to customers on their books for five or more years, and reviewing outcomes for vulnerable customers.
The qualitative survey encompassed 18 insurers covering around 85% of the gross written premium for both the motor and home markets) and a qualitative data collection (for intervention volume and value) covering 76% of the motor and property market.
Key findings are:
-All firms surveyed. have incorporated the GPAPs into their processes for determining renewal premiums and made the issue a Board or Executive level priority.
-Thirteen of the eighteen companies have gone further than FCA requirements on renewal pricing and are alerting new customers that the new customer premium only applies for the first year, and that renewal premiums may be higher.
-All firms surveyed have implemented a review process on renewal pricing, with 94% (by gross written premium) having a specific focus on customers who have been with them for five or more years.
-Firms covering 94% of gross written premiums have implemented processes to identify and review outcomes for vulnerable customers at renewal. The remaining firms have plans to do so.
– In total there were over 8.5 million pricing interventions across motor and home insurance over the 20 months included, worth a total value of £641 million. Individual firms reported an average saving per intervention ranging between £40 and £150 (for the majority of interventions)
James Dalton, ABI’s Director, General Insurance Policy, said:
“This review shows how positively insurers have responded to implementing the Guiding Principles and Action Points. The number of insurer interventions and range of average savings are benefitting millions of customers. There is a clear commitment from the industry to continue to deliver on the Principles, as their benefits to customers should grow over time”.
“There remains more to do, and we will continue to work with the FCA in its general insurance pricing review.”