“The 2020s could prove to be a make-or-break decade for many businesses within the sector. We could, potentially, see the entire industry change beyond recognition before too long.”
Those were the words of former Financial Conduct Authority (FCA) deputy chief risk officer Paul Dyer, who is currently head of regulatory risk and assurance at regulatory specialist Huntswood, in response to the FCA’s Sector Views report published yesterday (February 18).
Dyer noted how the regulator continues to challenge insurers not only on the issue of pricing practices but also in the areas of internal culture, diversity, and personal accountability. In its report, the FCA highlighted that insurance pricing practices still penalise loyal customers, adding that the watchdog is finalising remedies.
Offering his insights, Dyer commented: “The general insurance sector has been subject to substantial disruption over the past 12 months, with 2020 promising to be another tricky year as businesses deal with an increasingly volatile and competitive marketplace. However, there is real competitive advantage and opportunity for those firms who go above and beyond to ensure that their customers are not exposed to unnecessary risk or harm.
“Poor pricing practices, in particular, look set to remain a high-priority issue for the regulator moving forwards, meaning that insurance companies should be looking at their use of unfair or differential pricing models, especially when dealing with vulnerable customers.”
In the view of the ex-FCA official, a balancing act is required.
He explained: “To ensure they are delivering good customer outcomes, firms should focus upon developing pricing practices that seek to balance ‘return on equity’ and ‘value for money’. Putting in place a robust strategy and strong product governance will underpin this, allowing firms to set fair prices for their target markets, while also remaining compliant.”
