Recommendation from the Financial Services Consumer Panel had suggested automatically moving customers to new products
The ABI has criticised a proposal that firms automatically upgrade their customers to the best available product as a solution to dual pricing.
The Financial Services Consumer Panel (FSCP) made the recommendation yesterday. The option would “either require a firm to automatically upgrade its customers into its best available product or offer them a choice of better quality and better value products within the firm’s portfolio which suit their needs”.
However, Hugh Savill, director of regulation at the ABI, said this was not the “well-considered solution” that the issue of dual pricing needed.
He said: “The proposal put forward by the FSCP to automatically move customers onto other products overlooks the practicalities of underwriting and product choice.
“It carries risks, that customers could be moved onto policies that don’t take their specific circumstances into account or provide them with the levels of cover they need.”
The panel, an independent body set up in 1998 to represent the interests of insurers, made the suggestion based on a piece of research conducted by Europe Economics.
Insurers, including Aviva, RSA and Ageas, along with over-50s broker Saga, have already revealed the actions they are taking to remove the so-called loyalty penalty, where loyal customers pay more for their policy than new customers.
However, the CMA recently said that insurers need to do more to help eradicate the issue.
Savill added: “The ABI and its members are committed to working with the FCA and others on finding the right way forwards on the so-called loyalty penalty. Of all the sectors examined, insurers have already done the most to recognise the problem and take steps to address it.”
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