- New rules being drawn-up to ensure renewal quotes include previous premiums are a step in the right direction
- However relying on the basic requirement may provide customers with misleading information
- Insurers should prepare for more rules to come in the FCA’s final report
Commenting on the FCA’s decision to draw up new rules to ensure renewal quotes include previous premiums, David Brown, general insurance partner at KPMG, said:
“This announcement is significant as it is the first tangible output from the FCA’s focus on behavioural economics. The industry can certainly expect to see further rules in this area when the full report is released later this year.
“Ultimately this is a step in the right direction to improving trust between insurers and their customers. Our own research indicates that just 34% of UK general insurance customers believe that their customer experience has improved over the last year.
“In principle, ensuring consumers are provided with straightforward and easily comparable information is positive. However, as always, given the complexity of insurance risk and the simplicity of the measure, this figure alone may not give discerning consumers all the information they may want.
“It is common for premiums to change from year to year as there will be differences in risk from one year to the next. For example, as a customer ages, they may become more or less risky. They may accrue or lose their no claims discount. Product changes and inflation may have also an impact on the expected costs of claims, and therefore the premiums being charged. Furthermore, the comparison does not take into consideration discounts that may be available to new customers.
“To enable the new rule to give customers real information, insurers must go beyond providing the previous premium figure and proactively educate customers around how their premium has been calculated, as well as the overall benefits they receive to provide a more informed comparison.
“Successful insurers will be those who build the highest level of trust with their customers, and transparency on renewal pricing is just one element of this.”
Notes to editors:
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Simon Chan, PR Assistant Manager, KPMG
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KPMG Press Office: 020 7694 8773
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