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In the scramble for new customers via aggregators, insurers are being forced into a “vicious cycle” of offering new customers better deals than existing ones – a practice that could see them fall foul of the Financial Conduct Authority’s (FCA) transparency rules.
The regulator has been cranking up the pressure on general insurers that fail to comply with the rules introduced last April, which state that firms must clearly show the insurance premium a customer paid last year alongside the new premium at renewal time.
This month, the FCA warned that it will take action against firms still failing to meet the requirements – pointing to motor insurer RAC as latest firm found to not be providing policyholders with prior and current year premiums as well as the ‘shopping around’ message in its breakdown policy renewal documentation.
The FCA’s executive director of supervision for retail and authorisations, Jonathan Davidson, said it was “simply unacceptable” that some firms were still not being properly transparent a year on from the rules being brought in.
But insurers are held to ransom by the need to secure new business via price comparison sites where price is king, according to Tony Tarquini, director of insurance for the EMEA region at Pegasystems.
This practice means that insurers lose money in the first year of the deal and try to recover the loss in later years, meaning loyal customers pay more, the director explained.
“Consumers find the quest for new deals at renewal frustrating and a waste of time. They want their time back, the work of crafting a better deal done for them, and to be confident that they are getting a reasonable deal,” Tarquini said.
A recent survey from Pegasystems found that consumers are willing to make a commitment back to the insurer who will give them that comfort through innovative offers, and better, personalised service at renewal.
60% of respondents said making the renewal process simpler and personalised would be likely to make them renew with their existing insurer, and 69% said being offered a reasonable, fixed, three-year deal on insurance premiums with no increase in cost would also encourage them to stay.
According to Tarquini, insurers need to “re-imagine renewals” in a way that can benefit everyone, by using new digital and agile operating models, which can personalise the balance between making money and giving “real long-term value” to the customer.
“By doing this, insurers can break the vicious cycle forced on them of “new customers only” pricing, reward loyalty and kill off the loyalty tax stigma,” he said.
