The Blog Spot: Why on earth is dual pricing still going on?

Emmanuel Kenning

Emmanuel Kenning shares his thoughts after the launch of the ABI and Biba initiative.

To start with the positives. A big thumbs up for the ABI and Biba.

On Tuesday they launched Guiding Principles and Action Points to tackle “excessive differences” between new and renewal premiums in personal lines “that unfairly penalise long-standing customers”.

An awful lot of team work has gone into creating the initiative and both trade bodies deserve to be praised for their efforts.

As Biba CEO Steve White said to me it is further proof of the recent history of co-operation between the two organisations.

He put the launch in the top three of its most important collaborations along with vulnerable customers and signposting.

In the press briefing all parties were open and candid. Three points stood out to me.

1) Transparency that there is no “magic bullet”. Good, let’s be honest about the task ahead.

2) That the word customer was in the press release no less than 29 times. Good, customers should be front and centre.

3) The call for scrutiny – let’s take them up on this last one.

As I’ve made clear, I’m in favour and supportive of the endeavour. It is another example of how trade bodies should act together. (Personally I think the initiative should also be about commercial lines but I don’t want to digress.)

Andy Briggs, chairman of the ABI, argued that dual pricing was not unique to the insurance industry and listed it in other sectors including television, internet and energy providers.

“I am proud of the fact that we are the first industry to have taken positive collective action to try and address this problem,” he said.

And director general Huw Evans stated: “By actively inviting the FCA to scrutinise us and hold us to account about how well firms are implementing these principles we are setting the bar much higher than it has been up to now.”

I’m not as cynical as one market expert who summed up to me: “What they have announced is a nice set of words and now they can carry on doing what they are doing.”

However I see his point.

Dual pricing makes no sense. It should not happen.

I’m not talking about the difference between prices on different levels of cover which is an excuse that gets trotted out now and again.

It is about identical risks getting different prices and existing customers being penalised.

It causes huge reputational damage to the industry and ultimately insurance gets what it sows on this one.

In a curious way competition is already getting rid of the problem. According to the ABI some 75% of people already shop around.

I guess if that went up to 100% there would be no need for dual pricing!

Insurance claims to be professional, trusted, an industry that values long-term relationships, wants to help.

Yet the experience is the opposite of the message.

Trusting an insurer, staying with it for the long term should if anything be rewarded and yet it gets punished.

Customers are right to value their experience over what they are told. They view the sector as not wanting to help and amateurish.

While the ABI is proud of the efforts it is not being naïve and does not predict an end to dual pricing.

We should not be naïve either – and to me there remain two glaring problems.

The guiding principles and action points are neither compulsory nor truly statistically measurable.

Why should customers, given the experience outlined above, believe that just because an “ethos” is now going to be discussed at board level things will change?

Indeed surely they’ll question why it ever came to this in the first place!

And finally, perhaps most crucially, there is no metric to back up any improvement.

Again, I take the points made by the ABI. It is not here to set prices, it does not have legislative power and crucially there are legal issues around collecting such data.

Brokers will have heard constantly that they have to keep good records to be able to prove what is happening in the case of a dispute.

Here we are saying insurance is not collecting the data.

This makes the call for the FCA to get involved all the more sensible. They can crunch the numbers.

I asked the FCA about throwing its hat in the ring. It declined to comment.

It would be easier if stats were available.

Ultimately though the best and only true solution is the experience.

If there were no dual pricing in action then customers would feel it and the reputation of insurance would improve.

So brokers and insurers it is up to you now because words will not suffice.

The ABI and Biba have done their bit. It is time for industry action.

You know it is the right thing to do. Although the question remains, why on earth is it still happening now?

Emmanuel Kenning is a reporter at Insurance Age.

Further reading:

ABI calls on FCA to use new personal lines principles when supervising firms

Biba and ABI team up to tackle dual pricing in personal lines

News analysis: Dual pricing in regulator’s sights despite delay

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