Liam Casserley, Schemes manager here at SEIB Insurance Brokers discusses how dual pricing reforms are shaking up the insurance world.

Carry on reading Liam's commentary below, or take a look at the full article in Insurance Post here.

  1. Were insurers ready for changes?

We have only had dealings with a few insurers that were in scope of these new pricing rules, some have been more advanced in their discussions with us and test reporting than others. Working with insurers that embrace regulation and having open and honest discussions make for better outcomes for our clients which is a priority for both us as an independent broker and the insurer.

For the small number of our specialist insurance schemes affected by the new FCA General Insurance pricing rules, we were contacted in good time by the insurers involved and worked closely with them to have everything ready in time for 1st January 2022, when the new rules were brought in by the FCA.

Notwithstanding this, we’ve heard anecdotally about some insurance providers sailing very close to the wind in terms of getting the necessary changes completed in time. And we were also contacted by a major UK insurer who was convinced that the 1st January live date applied to both new business and renewals equally. We had to explain to them several times that whilst the new rules affected new business pricing for policies with inception dates starting 1st January, for existing business the pricing changes took effect with renewals invited from 1st January onwards

  1. Have we seen new brand launches as a reaction to the new rules?

Not that we have seen, these new rules are for clients protection and not an opportunity to rebrand we have not lost sight of this.

No, this development is not something we’ve seen so far. But we’re breaking new ground here and it’s only 3 months into the cycle. I would expect the majority of providers to still be closely monitoring the effect of the changes on their new business conversion performance, before considering tactical changes in their approach or strategic plans such as the launch of new brands.

Worth flagging that the new rules are not just about pricing, they also emphasise the importance of ensuring that customers are offered the right product for their needs, and get fair value in the long term. This means that knowing customers is key, insurance providers who have real time, granular customer data at their fingertips will be well placed to build trust by offering good deals and products that meet their customers’ needs. By doing this customers will not only want to renew but may also buy additional insurance products from the same brand. This could see close collaborations between insurers and insurtechs with access to powerful datasets or indeed the acquisition of such insurtechs. Either way we could see new brands emerging driven by clean, accurate data – and a lot of it – as their key differential

  1. What has the impact been on premium pricing?

SEIB does appreciate that especially in the current climate, cost tends to play a large part in how our clients buy but, SEIB aims to meet the demands and needs of our clients. Working with ‘A’ rated insurers and looking at the value of our proposition and not just at the cost,

but the speed and efficiency of our claims service so currently, we have not seen a major impact.

An increase in premiums for affected products was predicted, and this is what we’ve seen as all providers have had to make a one-off step change in order to fall in line with the new pricing rules. As the dust continues to settle, we will see premium fluctuations continue right across the market, as providers find their way within the new pricing landscape. We were fortunate not to be notably affected by the price-walking ban, as it was never a practice that we engaged in before the new pricing rules came in. Because of this we haven’t had to make significant changes to our pricing strategy

  1. What changes have policyholders seen?

As a result of the new FCA pricing rules, customers will have seen:

  • For customers with an affected product, their renewal premium will be the same as or lower than an equivalent price for a new customer
  • For the majority of general insurance policies, the customer will be able to easily opt out of auto-renewal
  • Providers must make it clear that the cost of insurance is higher if you settle premiums by monthly instalments, rather than through a single annual payment
  1. Are we seeing a shift yet in how policyholders purchase insurance e.g. are they still switching via aggregators

In a very hard market clients may alter their buying methods but that is why it is even more important to provide a robust customer service to retain clients.

Our products have been specifically developed for consumers and businesses in our chosen niche markets. This includes those affected by the new FCA pricing rules. While the future of consumer insurance will continue to be increasingly dominated by digital solutions, with many of these supported by aggregators, we’ve not seen evidence of our specialist consumer customers switching to aggregators; our service-led and expert advice-driven proposition continues to be the preferred option

  1. In the national media there have been allegations that people are still being charged more at renewal – are these substantiated and why might they be incorrect?

SEIB has implemented robust systems and controls to prevent this which has been our in house solution, we are very lucky we have the skill set to tackle this and support our adherence to the rules, not all brokers are in this position and as such some may struggle.

We have not seen any real evidence of this happening, although note that the media has highlighted stories about pricing being significantly increased following a mid-term change. The new FCA pricing rules are focused on requiring insurance providers to offer a customer renewing a policy, the same price it would offer them if they came to the provider as a new customer.

However, these rules do not apply to mid-term changes, such as a change of vehicle. However, if the risk itself has not changed appreciably then it would be expected that the annual premium would stay pretty level too. However, we have heard about examples of where such a change has happened but the customer has been presented with a substantial additional premium – far more than they expected to be charged by their

existing insurance provider for a similar risk. Our advice would be that customers who are looking to make mid-term changes to their policies should check they won’t be paying over the odds before they commit to the amendment. If the increase is particularly high, then the customer has the option of shopping around for a new policy with a cheaper premium, and cancelling their existing policy.

  1. when will we find out who [as in insurers] is suffering as a result of the changes, and is anyone already struggling?

We are not aware of anything currently but it could be too early to tell and who is going to be brave enough to put their head above the parapet first?