Fair Pricing Practice in Insurance - opportunity beckons
Let’s be honest for a second here: there are a few things less enjoyable than shopping for insurance. But there’s one thing we can probably agree that makes it on to that list, and that’s renewing insurance.
For most it seems that, come renewal time, you’re in for a lose / lose situation: if you claimed, your premium went up. If you didn’t, your premiums went up anyway.
However, changes are afoot to redress the balance someway in favour of the consumer.
The FCA's newly enacted rules for fair pricing in insurance are on their way, and they include;
a prohibition of 'price-walking' practices where prices are increased at renewal even when risk has not changed;
a requirement that auto insurance policies offer easy opt out methods;
and enhanced reporting requirements for insurance products.
The rules and systems to enforce these changes will be required to be in place by September, and companies must be able to utilise them for renewal processes by the end of the year. The key goal is to ensure new and existing customer pricing is equal and 'ending a pricing partition that has persisted for years'.
It might be a bit far to claim, as One source notes, that loyalty penalties in the insurance industry are a 'systemic scam', but it’s clear that the FCA rules come as a result of ongoing complaints from existing customers being up charged.
The changes are expected to drastically change the way insurers will maintain and maximize profitability.
Much of the shift in profitability strategy is projected to include smart data analytics, being used to both streamline operations and costs as well as improve understanding of customer needs.
But they are also a great opportunity for providers to re-examine the value that they provide to their customers, to innovate their products and services and start the journey towards building great, long-lasting relationships.
Customers may still benefit from shopping around for lower priced insurance, but because they won't be charged more just for renewal, companies will have to find new ways to differentiate from customers' existing insurance providers.
This may include app-based rewards to differentiate, using an analysis of policyholder's behaviour to determine what rewards are most impactful.
And, because it may be harder to aggressively compete via pricing, rewards and perks to drive customers to explore their insurance options may include cashback on fuel, discounts on repairs or maintenance costs of vehicles or property, and other rewards that help them reduce costs.
Where there’s change, there is opportunity.
Insurance, in one form or another, is something that every adult has to purchase in one form or another. We have a real opportunity here to go back to basics: to understand what customers truly need and value from their insurance providers, and to design propositions that a fair, engaging and truly rewarding, both when something goes wrong but also the long periods between - these are the opportunities to build those strong relationships that make renewing an easy decision, not a price-based one.
At CreateFuture we’re experienced in bringing brand, proposition and experience together to explore, imagine and create differentiated products. If you’d like to chat, please get in touch.