The Association of British Insurers (ABI) and British Insurance Brokers’ Association (BIBA) have launched a new plan to help tackle excessive premium differences between long standing and new customers.
Leaders at the ABI and BIBA agreed a set of guiding principles and action points that they said will address some of the issues in the current market that can lead to excessive differences between new customer premiums and subsequent renewal premiums that unfairly penalise long-standing customers.
By implementing this initiative, ABI and BIBA members can expect to see an improvement in the outcomes for long-standing customers, the associations said. The ethos and approach to better outcomes for long-standing customers will be formally incorporated into firms’ procedures for determining the premium at renewal.
The Guiding Principles and Action Points (GPAPs) apply to key personal lines insurance products such as home, motor and travel, but not pet or health insurance, which provide cover for medical conditions at renewal but not inception.
Key commitments include:
- ABI and BIBA members do not support excessive differences between new customer premiums and subsequent renewal premiums that unfairly penalise long-standing customers
- ABI and BIBA members will take action so that customers’ tendency to shop around at renewal is not used to lead to excessive pricing differences that unfairly penalise long-standing customers
- The ethos and approach to better outcomes for long-standing customers will be given board- or senior management-level priority and formally incorporated into firms’ procedures for determining the premium at renewal
- ABI and BIBA members should make clear in written, online or verbal customer communications that the new customer premium only applies for that year and subsequent renewal premiums may be higher
- ABI and BIBA members that affect the final premium paid by customers should review their pricing approach for customers who have been with them longer than five years and assess whether this approach delivers a fair outcome
- The ABI and BIBA will publish a report in no more than two years that demonstrates how their members have sought to tackle excessive differences between new customer premiums and subsequent renewal premiums that unfairly penalise long-standing customers
ABI chairman Andy Briggs commented: “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 GPAPs 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.”
Lord Hunt of Wirral, Chairman of BIBA, added: “It is part of the DNA of insurance brokers to put the best interests of the client first. That is why I am so delighted that insurers and brokers have come together for the benefit of our established and loyal customers, setting out a positive path forward on renewal pricing. I would encourage everyone within the wider market to join with us in adopting these guiding principles and action points.”