Insurers face a bill of up to £3 billion from the Lord Chancellor Elizabeth Trust ruling on personal injury damages payouts triggering a “massive jump” in shopping around, insurance market research experts Consumer Intelligence warns.
The decision to cut the discount rate to -0.75% from 2.5% will increase costs for insurers and add up to £100 to motor premiums as new rules on renewal quotes come into effect, Consumer Intelligence believes.
It is warning insurers to prepare for a spike in calls to contact centres which risk damaging staff and customer satisfaction levels as call times lengthen as providers struggle to explain why quotes have increased.
The discount rate is used to adjust amounts awarded in major personal injury claims where victims suffering catastrophic injuries are awarded lump sums based on the return that can be earned when the money is invested and has been set at 2.5% since 2001. The decision to cut it to a negative -0.75% increases the amount that insurers have to pay out.
The discount rate ruling comes shortly before new rules on showing last year’s premium on renewal quotes coming into effect in April which give customers easy comparisons with the previous year’s cost.
Ian Hughes, Chief Executive of Consumer Intelligence said:
“This is going to cause a massive jump in shopping around as this is the first year that insurers are going to have to be upfront about premium changes.
“At a time when premiums are going to go up possibly at the highest rate they have done for quite a while this is the first year that insurers are going to be required to fully explain increases to customers and there will be nowhere to hide.
“Call lengths are likely to increase and scripts will need to change as contact centres could become quickly clogged. And the costs of running them will also quickly rise as call lengths increase. Satisfaction levels for both customers and staff will go down.”
Consumer Intelligence is recommending insurers early preventative action to build a plan on how to deal with the expected rise in calls looking at the whole organisational impact and not just pricing strategies.
For further information, please contact:
Kevan Reilly / Phil Anderson
Citigate Dewe Rogerson
020 7638 9571
About Consumer Intelligence
Consumer Intelligence (CI) is a market research agency specialising in the General Insurance and Banking Sectors. We have spent the last 12 years perfecting the art of collecting data so that organisations can benchmark themselves. Since 2003, we have been collecting and analysing millions of prices across the telephone, direct insurer websites and aggregator channels. For more information, visit the web site www.consumerintelligence.com