Rodney Bonnard, UK Head of Insurance at EY, comments:
“Today’s Policy Statement from the FCA reinforces its commitment to improving consumer trust in the home and motor insurance industry, ushering in a new era of transparency. The most radical change, as signalled in September 2020, will be the end of ‘price walking’ which will no longer be admissible from 1st January 2022, meaning all firms have to offer existing customers the same price for renewal as they would offer a new customer. While this has been sign-posted for some months now, it is a huge undertaking, and firms are having to work at pace to overhaul their current business and pricing models. In practice, we expect this to be beneficial for longer term customers but customers who switch providers regularly may pay more once the reform is implemented.
“In the immediate aftermath of the transition, we could well see some product consolidation, however, over time, innovation will be crucial to competitive advantage and we will likely see home and motor insurers offering more multi-year and targeted products, enabling customers to buy only the cover they need. Throughout, it will be critical that offer details are clearly communicated to customers, with the FCA providing clarification today regarding the treatment of non-cash incentives. While the package of reforms do present challenges to the industry, they also offer opportunities to build brand loyalty and better engagement with customers.”