Insurers who don’t prepare for the new legislation could face £100m extra GDPR costs

Home and motor insurers could face £100m extra costs from no longer being able to contact historic customers once the new GDPR data regulations come into effect – unless they take action now, warns Consumer Intelligence.

When GDPR comes into effect next May, insurers will no longer be able to resolicit existing customers or recent leavers relatively cheaply and will instead have to rely on more expensive sales from price comparison websites, adding up to £100m a year to their costs, according to the insurance market analysis firm.

But it adds that the switch could be good news however for smaller brands and new entrants who already rely on  price comparison websites for sales and do not have the databases of bigger rivals.

The research showss that only 32% of motorists would give insurers permission to store their data, which means insurers would have to delete millions of customer records.

Analysis of Consumer Intelligence’s exclusive switching data for the leading home and motor insurance companies estimates some generate up to 30% of business through old customers returning to the brand which will not be possible under GDPR.

To maintain the same numbers of customers they will need to use price comparison websites where leads can cost £45 a time. The biggest impact will be felt by bigger brands with long-established customer bases, while new entrants and smaller brands which already rely on price comparison websites could benefit from a more level playing field, according to the research.

“Insurers who do not act quickly will have to pay out more in the future,” said Consumer Intelligence chief executive Ian Hughes.

“Currently the vast majority of insurers are not compliant with the new regulations and the industry needs a serious rethink in the way it engages with customers.

“The good news, however, is that those who do act will have a substantial competitive advantage and can turn a major threat to their business into a tremendous opportunity.”

Firms which focus on loyalty and reward customers will benefit as customers will be more willing to give permission to store their data, Consumer Intelligence said. However, research shows that just 28% of insurance customers feel their insurer rewards them for their loyalty.

Advice on preparing for GDPR includes starting to test opt-in messages with customers now, and asking permission to stay in touch with lapsed customers.

Companies planning for GDPR should also widen the staff involved to include customer-facing employees, instead of focusing on compliance and data storage issues, the firm said.