Biba’s chief executive said the voluntary measures are ‘benefiting home and motor customers’

Industry trade bodies Biba and the ABI have reported high engagement across its members with the Guiding Principles and Action Points (GPAPs) surrounding dual pricing.

The GPAPs were launched by the two trade associations back in May 2018 to address excessive differences between new customer premiums and renewal premiums – the bodies believed this difference penalised long-standing motor and home insurance customers.

The GPAPs include action points around prioritising better outcomes for long-standing customers at company board or senior management level, communicating to customers that renewal premiums may be higher than initial premiums, reviewing approaches for customers who have been on an insurer’s books for five or more years and reviewing outcomes for vulnerable customers.

A Biba survey, which polled members across the home and motor insurance markets, found that 89% of respondents are aware of the GPAPs. Brokers further reported that insurers had made “great strides” to bring new business and renewal pricing in line and that insurers are amenable to brokers who wish to negotiate changes to offered renewal premiums for long-standing customers on an individual case basis.

Brokers told Biba that some insurers have premium capping systems in place, however others have been able to end dual pricing approaches entirely.

The survey also found that the majority of brokers re-broke every year irrespective of price changes; 93% of those polled reported a motor re-broking system in place, compared to 89% for home insurance.

In addition, brokers said that system-generated renewal prices were monitored for increases so that underwriters could be contacted about premium levels where appropriate.

Steve White, chief executive at Biba, said: “Our members have embraced GPAPs and this is benefiting home and motor customers.

“In light of the success of this voluntary action by both brokers and insurers, it is clear that the Financial Conduct Authority needs to note the positive impact of GPAPs.

“Brokers offer a holistic approach to their client’s insurances, considering the breadth of cover under a policy and the claims-paying history of the insurer before considering whether switching to obtain a financial saving is in the customer’s best interests. This care negates the need for auto-switching, which might instead cause customer harm.

“All customers are different and sometimes the safety net offered by an auto renewal process ensures continuance of motor insurance, required by law or home buildings insurance often necessary under a mortgage and the practice should be allowed to continue albeit on an opt-in basis.”

Clear commitment 

The ABI conducted a similar survey across 18 of its insurer members. It found:

  • All firms surveyed have incorporated the GPAPs into their processes for determining renewal premiums and have made the issue a board or executive level priority.
  • Thirteen of the 18 companies are alerting new customers that the new customer premium only applies for the first year and that renewal premiums may be higher.
  • All firms surveyed have implemented a review process on renewal pricing, with 94% having a specific focus on customers who have been with them for five or more years.
  • Around 94% of firms have implemented processes to identify and review outcomes for vulnerable customers at renewal. The remaining firms have plans to do so.
  • In total, there were over 8.5 million pricing interventions across motor and home insurance over the last 20 months, worth a total value of £641m. Individual firms reported an average saving per intervention ranging between £40 and £150 (for the majority of interventions).

James Dalton, the ABI’s director for general insurance policy, added: “This review shows how positively insurers have responded to implementing the Guiding Principles and Action Points. The number of insurer interventions and range of average savings are benefiting millions of customers.

“There is a clear commitment from the industry to continue to deliver on the principles, as their benefits to customers should grow over time.

“There remains more to do, and we will continue to work with the FCA in its general insurance pricing review.”