Cuvva: Loyal Britons pay 30% more for their insurance than new customers
Yesterday was the last day interested members could comment on the Financial Conduct Authority’s (FCA) proposed package of remedies aimed to eradicate the damage dual pricing and auto-renewals has on consumers in home and motor insurance.
According to the FCA, new customers can pay as much as 30% less for their insurance than existing customers who have been with a provider for over five years. Roughly 10 million policies across home and motor insurance are held by people who have been with their provider for five years or more.
Following the consultation period, the financial regulator plans to finalise and publish its policy statement in Q2 after carefully studying the potential impact of its remedies on the market and reviewing and monitoring the impact of COVID-19.
In a recent update, the FCA noted a correction relating to the impact of its proposed remedies. The estimated benefits to consumers over a 10 year period is half a billion pounds more than initially presented in its market study due to an error found in its code – increasing from £3.7bn to £4.2bn.
Freddy Macnamara, CEO of Cuvva, the flexible insurance provider commented, “Over the years price comparison websites have controlled pricing in the insurance market, pushing prices so low they’ve become unsustainable, which in turn leads to insurers bumping up prices at renewal to compensate for the initial low premiums set.
“Dual pricing has created an industry that demotes customer loyalty as comparison websites rely on people switching annually.”
The FCA’s remedies are largely centred around ensuring the price insurers charge existing customers at renewal is no higher than the price a new customer is offered for the same product.
Macnamara said: “FCA’s remedies are seriously needed to ensure fairer outcomes for customers. What the measures mean for consumers in the short-term, is a potential increase in premiums on price comparison websites to level out premiums at renewal time. In the long run, people will see fairer outcomes as consumers have a more realistic understanding of the cost of their premiums over time, while promoting loyalty and healthier competition.”
Another FCA focused remedy is to see the industry offer customers fair value by insurers making it easy for customers to decline or end auto-renewing both when they purchase a policy and at renewal.
According to the FCA, insurers can make cancelling auto renewals very complicated for consumers and use pricing techniques to identify those likely to renew. Insurance premiums are increased for these customers who mistakenly believe they’re being offered a competitive price at renewal. Additionally, customers are deterred from switching and getting a better deal with an alternative provider because some insurers make it so difficult to cancel a policy.