Norwich Union (NU) has introduced new rates for its private car policies as part of an ongoing review that should eliminate the extreme price differences between its broker and direct channels.
The insurer was engulfed in controversy last year after several brokers complained in Insurance Times that some premiums were up to £500 more for the same risk charged by its direct operation.
It led to the British Insurance Brokers' Association (Biba) holding a special “dual pricing” debate at its annual conference in April 2000.
The new rating structure should help introduce a level playing field with consistent rating criteria across all distribution channels, as well as more accurate risk assessment.
But the UK's biggest motor insurer was unwilling to say whether broker business would be more expensive than its direct business on average. NU was also remaining tight-lipped about whether the advertising spend for its direct business would be included in the total customer-acquisition cost.
Richard Alger, motor market development manager at NU, said: “Our long-term aim is the introduction of more consistent rating criteria for all customers, which will help to resolve the larger price differences that have occurred between our broker and direct channels.”
He added: “We're not saying that brokers and our direct business are going to have the same price, but we are saying it is much fairer.”
NU currently has around one million private motor policyholders and 20% of the motor insurance market.
The company has no figures for motor insurance in particular, but in personal lines, 43% of business is through the broker channel, 38% through its corporate partners and 19% through Norwich Union Direct.
Alger said NU had spent the last eight months analysing the details of more than seven million records to develop a more scientific approach to underwriting.
“We'll be using a greater number and combination of rating factors to more accurately assess risks, so premiums will more accurately reflect a customer's vehicle type and driving history.”
Broker reaction to the move has generally been favourable. Paul Chesters of brokers Franklands in Derby said: “We're pleased to see Norwich Union taking a more
scientific approach to motor underwriting. The differentials between broker and direct rates have been a bone of contention between brokers and NU for some time. Hopefully, this will see the end of that.”
Simon Bolam, proprietor of EH Ranson, Edinburgh, said: “I welcome it because it produces a level playing field. It should cut out some of the huge swings where the premiums have been vastly different.”
But Andrew Paddick, director general of the Institute of Insurance Brokers, sounded a word of caution. “When brokers compare quotes it will be interesting to see if there are any premium diffentials.”
