The FCA have today published the interim report from their market study into the pricing of home and motor insurance. Their findings are that competition is not working well for consumers in these markets.
The FCA estimate that around 6 million insurance policy holders pay high prices and are not getting a good deal on their insurance, and they estimate that if these consumers paid the average price for their particular risk they could save a staggering £1.2bn a year.
What’s more, this impact is spread right across the market, including to the 1 in 3 consumers who are potentially vulnerable.
FCA findings from their study include:
- Widespread differential pricing between new customers and renewing customers, known as “dual pricing”
- Deliberate pricing based on an expectation of whether a customer will switch, with this not made clear to consumers
- Firms deploying tactics to raise the barriers to switching.
Commenting on this, the FCA’s Executive Director of Strategy and Competition, Christopher Woolard, said:
This market is not working well for all consumers. While a large number of people shop around, many loyal customers are not getting a good deal. We believe this affects around 6 million consumers.
We have set out a package of potential remedies to ensure these markets are truly competitive and address the problems we have uncovered. We expect the industry to work with us as we do so.
The FCA are putting in place measures to address the problems seen in the market, and these including improving transparency for renewal pricing, but importantly they are also considering stronger measures to address the market’s failings, such as:
- Stopping practices that could discourage switching
- Forcing firms to be clear and transparent in their dealings with consumers, including the publication of price differentials between new and renewing customers.
We fully support the FCA’s findings and believe that general insurance market is in dire need of overhaul in ways such as those indicated by the FCA. In particular, the idea of bringing transparency and fairness to the market - hardly radical concepts for most sectors yet seemingly groundbreaking for insurance - are to be welcomed. Indeed these are core principles that honcho are built on and are already bringing to the motor insurance market.
Gavin Sewell, honcho CEO:
We absolutely welcome today’s initial report from the FCA. For too long consumers have been at the behest of some very questionable tactics within this market, and it simply has to stop.
Whilst organisations such as ours are leading the charge into bringing transparency and fairness to insurance, we’d call on all organisations in the sector to look very carefully at their core operating principles and ask themselves whether they actually have consumers at the heart of their focus. The time for change is long overdue.