Hey Insurers, Step Away From That Price Walking Crack Pipe

Some strong opinions here, by all means feel free to post a comment below;

Consumer Intelligence welcomes the announcement from the FCA on price walking.

Up until today, every single player in the market has been hooked on introductory pricing – the crack
cocaine of the insurance industry – insurers and consumers alike. The industry has attempted to wean itself off in recent years by narrowing the gap between new
business prices and the prices charged at renewal (known as price walking), but it
clearly wasn’t enough.

Rather than providing methadone to treat the industry’s addiction, today’s ruling from the FCA
requires firms to go cold turkey – completely eradicating the practice of introductory pricing and the
loyalty penalty. This could be considered a win for consumers, and more so for vulnerable
customers.

The industry has always struggled with a bad reputation, and this has only worsened since the
pandemic hit. Our research shows that consumer perception of insurers has remained rock bottom
since March. The removal of price walking provides the industry with an opportunity to regain
consumer trust.

With insurers no longer hiking premiums up at renewal, price will become only one of the deciding
factors, rather than the deciding factor for consumers when purchasing insurance. Firms will have to
start focusing on the value of their products, strength of their brands and quality of customer
service to win and retain customers.

Our data tells us that today’s intervention will not impact all insurers equally. Currently in the motor
insurance market, we see premiums rise by an average of 2.54%. In home, it stands at 12.67%.
Home insurers will need to radically rethink how they do business.

Also announced today is that insurers will not be able to turn their attention to
making money elsewhere, such as credit offerings to instalment payers and add on products.
As a result, one thing is absolute – premiums are going to rise. In the current model, insurers offer heavily discounted new business prices to
acquire new customers, but don’t make profit until year 2 or 3 of the policy. So naturally, prices
will need to even out to support the sustainability of the industry.

In the long term the announcement will increase confidence in financial services, however it is going
to be a rocky year as the insurance industry and their customers wean themselves off the crack
cocaine that they have been so accustomed to.

Brands investing in customer loyalty

ADMIRAL:

A brand already winning in this space is Admiral. Admiral’s move to automatically give motor
customers back £25 during lockdown has been handsomely rewarded by a surge in brand loyalty and
renewals.

This time last year Admiral’s customers were amongst the most fickle of the bunch, with 85.9%
shopping around at renewal, above the market average of 83.1%. Only 14.1% renewed without
shopping around, compared to a market average of 16.9%. But data from our Insurance Behaviour Tracker tool reveals a step change. As many as 21.4% of
Admiral customers renewed their car insurance without shopping around in the four months to July.

About alastair walker 4457 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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