Behind the FCA’s decision to force pricing transparency at renewal was a desire to improve the treatment of loyal consumers, promote competition, and address concerns about consumer engagement at renewal.
The regulator itself has said it expects the rules will prompt more shopping around.
We know that each demographic has a different ‘tipping point’ for shopping around, and that on average when price rises go above £40, more than 50% of the consumers will switch to a new insurer.
We also know from our Insurance Behaviour Tracker that consumers are least likely to shop around when they perceive no change in their premiums. In other words, consumers are more inclined to shoparound for a new quote when their premium has got cheaper compared to if it has stayed the same.
The FCA’s requirement has meant onerous changes to renewal systems and customer communications. Will it be worth it and drive the changes the regulator wants to see?
Nine out of ten consumers tell us that they already check their premiums against the previous year. Of those, 75% claim to check the previous year’s renewal notice, 13% check through their bank statement, and 4% ask their current provider what they paid last year.
Drawing attention to pricing changes to even the small minority of those who don’t check will make a big difference in this volume driven market in any case.
Where the findings become more of a challenge to brands is of their expectations of how behaviours will change. 89% currently think that insurance brands give better prices to new customers than to loyal customers.
They expect the FCA’s requirement will prompt brands to alter this behaviour.
The final point to note is that consumers are very supportive of the requirement.
When we asked them why, the answers centred on transparency and improving trust.
“Because it is a disgrace the way insurers are out to tempt new customers and ignore their loyal customers”
“Helps keep track of how much you are paying from year to year and gives a more real picture”
“Hopefully it will mean that either more people will switch as they'll see how much the insurers are increasing their policy costs OR insurers will start rewarding loyalty and existing customers will get a fairer deal.”
“I want as much information as possible to ensure I get the best deal. As I keep previous year's policy info, being informed about last year's price saves me time researching.”
“Important for comparison. Insurance costs fluctuate, but often feel that you are not first offered the best possible premium and have to haggle instead”
“If your supermarket increased the price of a pint of milk you'd want to know why. Ditto with insurance premiums: is it my claims record, age, inflation or profiteering?”
These are early days in any case, and the disclosure will come as a surprise to most motorists. Only a quarter of those surveyed knew about the change.
Consumers are expecting brands to start rewarding loyalty. Could the FCA’s rule changes be the prompt that gives brands a choice to change their priorities on acquisitions and renewals?
What if you could improve your retention whilst also complying with FCA guidelines and improve your customer engagement at the same time?
Consumer Intelligence have a panel of 3,600 market representative real risks from our market research online panel Viewsbank.com where we collect real renewal notices, compare and benchmark them against our 10 point assessment criteria. Our Renewal Notice Benchmarking proposition helps insurers drive retention and improvement customer engagement therefore positively impacting the bottom line.