More than three-quarters of businesses (77%) are concerned that they will lose customers following the implementation of the Financial Conduct Authority’s (FCA) pricing review which was put into place on the 1st January 2022, according to new research from Trustly, the leading global payments platform for digital account-to-account transactions.
The updated review – which forces insurers to improve competition and protect customers from loyalty penalties – has seen more than three quarters (76%) of businesses change how they calculate their quotes for home and motor insurance, despite 64% feeling concerned that this will cause them to lose their competitive edge when looking for new customers.
In fact, prior to the FCA’s new rules, more than two thirds of insurance companies confirm that they offer competitive quotes with the view of drawing in new customers.
However, now required to offer renewing customers a price that is no higher than they would pay as a new customer, insurers are looking for new ways to draw customers in. Some 32% plan to offer new methods of payment to meet changing consumer demands, whilst 29% plan to offer instant refunds at the beginning of a contract for claims. Others are focusing elsewhere. A third (30%) intend to offer vouchers to other services such as Amazon, whilst 29% plan to offer dedicated contacts for each customer.
Whilst the FCA estimates that these measures will save consumers £4.2 billion over the next ten years by removing loyalty penalty and making the market work better for them, some might see their premiums increase, with nearly three quarters (74%) of respondents planning to increase premiums to both current and prospective customers so that everyone is on the same policy figure. Plus, nearly one quarter (24%) plan to increase these by 61-70%. This would add between £260 and £300 to the average UK comprehensive car insurance which was £429 in Q3 2021 according to the Association of British Insurers.
Stuart Barclay, Head of Growth, Financial Services at Trustly commented “With reduced opportunities for cut-price offers for new customers, we’re going to see consumers focus more on the value and service they receive from their insurer. Customers care more than ever before about how quick and easy the claims payout process is – 79% agree that the speed of a claim payment affects their selection of insurer. Insurers need to focus on how they digitise and speed up this process, all whilst providing internal cost benefits. This is why at Trustly, we’re encouraging insurance companies to turbocharge their claims process through open banking”.
In light of the new requirements, the vast majority (93%) of respondents now plan to offer the same benefits to current customers as they do to new customers. Though, less than half (27%) will only offer them if the customer calls to ask for them.