Insurance industry tackles ‘loyalty penalty’
The Association of British Insurers (ABI) and the British Insurance Brokers’ Association (BIBA) are to address issues in the current market including where long-standing customers are penalised with higher renewal prices.
As part of its Guiding Principles and Action Points published today which affects home, motor and travel insurance but excludes pet and health insurance, a series of commitments have been made:
- No support for excessive differences between new customer premiums and subsequent renewal premiums that unfairly penalise long-standing customers
- Action will be taken so that customers’ tendency to shop around at renewal isn’t used to lead to excessive pricing differences that unfairly penalise loyal customers
- ABI and BIBA members should make clear in written, online or verbal customer communications that new customer premiums only apply for that year and subsequent renewal premiums may be higher
- For customers who have been with an insurance firm longer than five years, members should review their pricing approach and assess whether this approach delivers a ‘fair outcome’
- To publish a report in no more than two years’ time demonstrating how excessive differences between new customer premiums and subsequent renewal premiums that unfairly penalise long-standing customers have been tackled.
ABI chairman, Andy Briggs, said: “Insurers do a great job for their customers, providing peace of mind and financial help when they most need it, but the renewal market simply doesn’t work where loyal customers get charged much more than new customers.
“Given many consumers expect to get cheaper insurance when they shop around, there is no easy solution. These new Guiding Principles and Action Points are a positive initiative by the ABI and BIBA members to demonstrate that the whole industry recognise this is an important issue that needs to be addressed.”
The commitments come after the industry was also tasked with making insurance renewals more transparent as they have to display the previous year’s price on premium documents.