The Blog Spot: Solving dual pricing with three figures

Emmanuel Kenning

In an excellent piece in The Times last month was a reference to a suggestion – that renewal invitations should in fact have three prices on them.

It’s an exciting idea that I had never seen before.

At the moment the legislation is that renewal invitations have to have two prices on them (as well as a prominent shop around message).

The rules have been in place since April 2017. Despite being straightforward not every insurer is following them properly – more on which in a moment.

So what’s the third price?

Imagine if you will receiving a renewal invitation from your personal lines insurer which stated: last year’s premium, this year’s premium offer, and – here’s the crucial part – what they would offer you if you were a new customer.

I asked a few compliance consultants, brokers and insurers what they thought of the idea.

Here are a few responses.

One expert said it would kill dual pricing stone dead.

“Nobody is going to accept a renewal where they have got a figure clearly showing if you come to us as new business we’ll give you this [lower amount].”

Another was more exasperated by the fact that dual pricing even exists: “Are we that stupid that we can’t offer the same price to a renewing customer as to a new customer when they have the same amount to insure?”

However, they flagged a problem with the theory namely that of causing consumer confusion with three prices.

A third respondent backed up the warning that people would find three prices complicated. And had further concerns.

“Transparency works to a point,” they began. “A creeping price increase is not as obvious as people think.”

And the fourth interviewee really did disagree.

“It is treating the symptoms rather than the cause,” they argued.

“There needs to be a fundamental rethink to the pricing approach as opposed to putting prompts into documentation for customers.”

Adding: “The area of most concern is vulnerable customers who they [the FCA] acknowledge are not shopping around and are not likely to be doing so. I don’t think it particularly matters what you say in your letters or renewal communications it has to be dealt with from the other side.”

I take on board all the points. The balance appears to be against rather than in favour.

But I still think the suggestion is a good addition to the ongoing debate as the FCA conducts its investigation into the home and motor markets.

Remember when I mentioned a few paragraphs ago that there would be more on the renewal invitation point?

Well Aviva must surely have been embarrassed when it had to email Quotemehappy customers to say sorry after failings in its renewal transparency.

It is not the only insurer to have hit the headlines for not following what are frankly fairly simple rules that have been in place for over a year.

Such events do not help raise the standing of the insurance industry in the eyes of the public.

But to be fair yesterday the insurer rolled out its latest offering: AvivaPlus.

The subscription-style product is initially only available direct. However, the provider is in talks with brokers about its home and motor product.

Designed to address consumer concerns including dual pricing Aviva’s service is definitely worthy of scrutiny.

It may not involve three numbers but at least the insurer has moved to tackle the issue head on.

Hopefully others will follow just as publicly.

Tackling dual pricing is the right thing to do for so many reasons and needs to be addressed urgently.

The industry has been warned repeatedly and if it doesn’t step up then the regulator will.

If it comes to pass that the watchdog imposes new rules there will be no point bleating about the changes.

There is still time to sort the mess and not doing so will be an epic failure that the sector will have to well and truly own.

Emmanuel Kenning is a reporter on Insurance Age

Further reading:

Aviva aims to disrupt the market with new subscription-style product

FCA points to “remarkable” insurer failings as it launches “fundamental” market review

FCA to tackle dual pricing in general insurance market study

Aviva writing to customers after renewal transparency failing

FCA gives 1 April deadline for renewal transparency

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