FCA could tackle concerns that existing policy holders are penalised
Motor insurers who save their best rates for new customers to the detriment of others could be investigated by the Financial Conduct Authority, an industry expert has warned.
Speaking to the Insurance Times, Ian Hughes, Chief Executive of market insight provider Consumer Intelligence, questioned the practice of offering discounted premiums to new customers but not to existing clients.
He said: “Is it a fair outcome that a customer that has been with you for six years could, for instance, get a premium that is half what they are currently paying if they were a new customer?
“I would argue that it is not and (that) is the sort of thing the FCA would look at.”
Mr Hughes added that he expects the regulator to examine new business discounts because of its focus on ensuring fair outcomes for customers.
He described them as a “real problem” and blamed insurance companies rather than price comparison websites.
He revealed: “A lot of people try to put the blame at the door of price comparison sites, but they are not to blame for this problem.
“This problem is created by introductory discounts – by giving your best prices to your least loyal customers.”
Mr Hughes said that the insurance industry would serve its own interest by addressing the new customer issue itself, rather than being forced to act by the regulator.
He said: “It is always my hope that the industry can be grown up enough that it can recognise and fix its own failings. When a regulator has to step in, nine times out of 10 that creates issues and challenges all of its own.”
Hughes suggested that – in preference to attracting customers with financial incentives - insurers should focus on marketing and creating products that satisfy customers' needs.
Mr Hughes explained: “The problem is that if any one company starts to try and address the problem then, unfortunately, they will lose a lot of business.
“No one company can fix this by themselves. It needs to be corrected as an industry and that is a big challenge.”