Biba and the ABI have announced a set of guidelines to tackle the dual pricing problem, but will companies take much notice?

Consumer intelligence has highlighted how loyalty can cost a customer more in the long term.

According to Consumer Intelligence data, car insurance customers who’ve been with the same insurer for eight years can save nearly £131 while householders will save around £119 by moving after seven years.

The average saving for moving car or home insurance after a year is £64 for drivers and £34 for householders.

Ian Hughes, chief executive of Consumer Intelligence said: “The initiative from insurers and brokers is very welcome and shopping around is increasing with more than 1.4 million comparing prices in the past year.

“The good news is that consumers are better informed than ever and the FCA has made it clear that it is keeping a close eye on whether firms are adequately displaying the previous year’s premium at renewal. The hope is that drawing consumers’ attention to what happens to their premiums at renewal will promote competition and ultimately help to wean insurance brands off dual pricing, whereby new customers get the best prices and loyal customers pay more. “

ABI and Biba guidelines

On Tuesday, the ABI and Biba announced a set of guidelines and principles to tackle the problem. But as they are only guidelines, they are not compulsory for members to follow.

Steve Southall, head of EY’s insurance risk and regulation team said: “Yes they can (ignore it). What is critical in the next few months is how firms respond to it, but I think it will be overtaken by other events.”

The Financial Ombudsman Service (FOS) released a newsletter in April, which explored the issue of pricing. Also, the FCA is currently conducting a thematic review of pricing, and the results are due to be released later on this year. Also, earlier this year, the FCA introduced a rule that companies have to publish the previous year’s price on a renewal notice.

Southall thinks these matters provided the backdrop to the ABI and Biba’s announcement.

“If you take all three and look at the principles the ABI and Biba announced, they were made with that backdrop. I think it is the industry trying to set its own benchmark, given the activity of the FCA and FOS.”

But with the FCA’s thematic review likely to bring up some new rules and principles, Southall believes the real rules where companies take notice will come from that.

“I think the real rules are going to come out of the FCA study. If the FCA come back with their report and say all these principles and rules need to now be followed, however similar to those that FOS or Biba and the ABI issues, that will be the blueprint firms will have to follow. Because if they don’t, the FCA can come back down on them quite hard.

He concluded: “This is a helpful set of guidelines to help firms develop or revise pricing strategies to ensure they continue to treat customers fairly and meet regulatory expectations.

”However, the recent FOS newsletter and the upcoming FCA thematic report on household pricing do and will also provide important reference points for the industry and firms may need to reconcile any differences in principles published by these three stakeholders.”