Insurers to Review Commitment to Loyal Customers
In all types of Financial Services products, one of the complaints you hear most frequently is that you have to frequently switch providers to get the best deal, by taking advantage of special rates and offers that are only available to new customers. The insurance sector is currently facing particular criticism on this front, with a new Which? investigation this week finding that customers with combined policies owned for longer than a year were paying on average 38% more than new customers. The results only get more concerning over time, with policies that were four to six years old found to be 54% more expensive compared to prices paid by new customers.
Earlier this year, the Association of British Insurers and the British Insurance Brokers Association announced a list of “action points” aimed at tackling this problem, with an overall goal of “reducing excessive differences between premiums for new and existing customers”. Firms belonging to either of the two industry bodies will pledge to take preventative measures to ensure that loyal customers are not “unfairly penalised” at renewal time. They will also need to reassess the fairness of pricing strategies, with insurers reviewing their pricing for customers who have been with them for over five years.
The plan applies to home, motor and travel insurance, but so far pet and health insurance are not included. In a press release this morning ABI chairman Andy Briggs said “The renewal market simply doesn’t work where loyal customers get charged much more than new customers” and that “These new guiding principles and action points are a positive initiative by the ABI and BIBA… to demonstrate that the whole industry recognises this is an important issue that needs to be addressed”
The treatment of existing customers is also on the minds of regulators, with it highlighted as a key priority in the FCA’s 2018/19 Business Plan. The plan stated that they “aim to ensure that existing customers enjoy the benefits of increased competition and innovation” and that “firms should not give longstanding customers less attention than new customers or treat them in a way which results in poorer outcomes.” They did note that many firms have made progress on centring existing customers in their business models, and while there has definitely been a growing recognition of this issue in the industry over the last decade, there’s still a long way to go. Hopefully, with these new ABI/BIBA plans, the insurance sector can lead the way in prioritising and rewarding longstanding loyal customers.
