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CII responds FCA measures to protect home and motor insurance customers from loyalty penalties

Publication date:

28 May 2021

Last updated:

28 May 2021

Author(s):

Chartered Insurance Institute

In response to the FCA’s measures to protect home and motor insurance customers from loyalty penalties, Matthew Connell, Director of Policy and Public Affairs for the Chartered Insurance Institute, said: “The CII’s Public Trust Index consistently showed consumers were unhappy about the loyalty penalty.

“Insurers being required to offer renewing customers a price that is no greater than they would pay as a new customer is likely to increase trust in the profession. It could also push up prices for those who previously always shopped around – but this is a price worth paying. The current system only rewarded customers who didn’t trust insurance companies – and those rewards were often subsidised by elderly people who found it more difficult to keep up with their finances. This is no way to build trust.

“While some providers have taken significant steps to prevent price walking in recent years, in a competitive market, and with behavioural biases prompting customers to follow low initial prices, it was always going to be difficult for insurers to solve this problem on their own, and so it is good that the regulator has lent its weight to finding a solution.

“However, we shouldn’t stop here. We know from our research with consumers that there are factors that they value above price, including: speed of paying claims, adequacy of cover, ease of doing business and confidence that the insurer will pay out. If we can find a way of presenting performance against these factors in a way that is as clear and convincing as the price of the product then the problem of price walking can be banished without the need for regulation. That will be the next step for building trust in insurance for our profession.”

This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.