Insurance renewal rules by the UK’s Financial Conduct Authority (FCA), which were created to encourage consumers to shop around as contracts approach expiration, have failed to have any significant impact according to Phoebe Hugh, CEO of insurtech, Brolly.
“The biggest challenge for insurtechs is that consumers are inert in insurance and there is a big challenge there that people are realising that they are not always getting the best products for their needs, or the best prices,” says Hugh.
“I think the FCA put onus on insurance companies to be clear on a renewal form, but they can probably get a better price shopping around. I haven’t seen any results yet that show that customers have done that. Even the FCA found that consumers didn’t react to that in a significant way anyway.
“The FCA are making moves here but I wouldn’t be surprised to see more requirements on insurance companies from the FCA.
“In the absence of that and recognising that these things do take time, we are certainly putting our foot forward and trying to make changes for consumers to make things easier for them, more frictionless, and more transparent. Maybe the industry will catch-up, maybe it won’t, but this is something that we think needs to happen now.
“Customer inertia in insurance is certainly a major challenge for all new entrants establishing a new brand in the market. Of course, this is likely to be a deterrent to those wishing to enter the space, so insurance start-ups will have to be creative in terms of how they acquire new customers and differentiate themselves from current offerings already in the insurance market.”
The FCA established the insurance renewal rules in April 2017. In October of the same year, the FCA outlined concerns that firms were failing to provide correct premium information, present the premiums and shopping around message clearly, implement the rule changes for all their products and services, and properly identify a ‘renewal’ as defined by the regulator.
In April last year, the FCA warned that it may have to take action against several general insurance firms who were still failing to properly implement the rules.
In September Citizen’s Advice lodged a super-complaint with the Competition and Markets Authority (CMA) after it discovered customers “who stayed loyal to their providers are losing out on over £4bn a year.”
In October, as part of 2018/2019 business plan the FCA said it would look into general insurance pricing practices. Part of this market study, of which an interim report is expected to be published in the summer, will look at the impact of pricing practices on competition.
For Hugh, the only current way to cause change is through technology and personalisation of insurance policies.
“We need to use technology to enforce those changes. Nobody would be paying more than they needed to if it was easy to switch.”
“The reality is that it is the bottom of people’s priority list to be shopping around for insurance on a Sunday afternoon, it just gets left off and the cycle continues.”
“We are seeing the insurtech market will be moving away from pure aggregation where customers have 50 different options and they don’t know what to choose, to something that is a little bit more personalised.