Shake-up of UK motor and home insurance promises £4bn in savings

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The UK personal insurance market will experience major turmoil next month as a radical overhaul of pricing rules appears to disrupt the sector serving millions of customers.

The new system imposed by the Financial Conduct Authority Punch out A practice known as price walking, where insurance companies profit from attracting new customers at low prices and raising renewal premiums.

Instead, the provider must offer existing policyholders the renewal at the same price they received as a new customer. Regulators estimate that this will save customers £ 4 billion over a decade.

This change will affect two core areas of non-life insurance. According to industry data, there are 18 million homes and motors, which account for 27 million insurance policies across the UK.

“It’s a big moment,” said Matthew Upton, policy director for civic counseling. Complaints 3 years ago. It emphasized that people were paying nearly £ 900 each for “punishment for loyalty” across five markets, including insurance and broadband.

Upton said the existing “bullying and oppression” model (insurers offering low prices to new customers and then raising premiums over time) has turned into a “collapse of trust” between consumers and the sector. He said he contributed.

Mark Christer of consultancy Capco said the new rules represent “the biggest price change ever happened in the UK personal insurance market.”

Analysts expect new customers to pay higher premiums as insurers try to offset the impact on future profits, but predict the sustained impact of change in the market. Said it was difficult. If some companies decide to use it as an opportunity to gain market share, the impact may be mitigated.

Paul De’Ath, Head of Market Intelligence at consultancy Oxbow Partners, said:

The most dramatic effect of home insurance is expected, as the price difference between new and new customers is greater than in the highly competitive car insurance market.

However, it is unlikely that a significant increase in premiums for new home insurance customers will continue in the long run, De’Ath said. [companies] With a more efficient business model. “

Some analysts believe that overall housing and automotive policy price volatility will settle by the second quarter, while others expect it to last longer.

James Dalton, director of non-life insurance at the British Insurance Association, said the “once-in-generation” challenge for businesses is that everyone “must do the same thing at the same time.”

A bar graph of the annual cost of insurance against typical risks, showing that long-term UK customers have been punished in the past £

Aviva Chief Financial Officer Jason Windsor told the Financial Times that he expects the first quarter of these segments of non-life insurance to be “bumpy.” Like rival insurance executives, he predicted that factors other than price, especially customer service, would be more important.

This change has brought additional uncertainty to the sector still dealing with the effects of coronavirus restrictions. The good news for customers is that pandemics have pushed down insurance costs. Auto insurance is the cheapest in six years after insurers have reduced their premiums to reflect the decline in claims associated with blockades.

However, insurance broker Willis Towers Watson warns that the outlook for pricing is “very uncertain” due to a mix of new rules and supply chain issues in areas such as auto repair. doing.

Earlier this month, ABI caveat Policyholders say that despite the changes, renewal premiums may still increase. Pricing is based on a variety of factors, including billing made during the period, individual risk profile changes, and repair costs, ABI said. They advised those who update to shop.

New rules make it easy for customers to cancel automatic policy updates. But before opting out, ABI said customers should “think about the factors that can cause you to forget.” [to renew]There is a risk of being uninsured, for example, when you are on vacation or busy with work.

The new rules are expected to have a dramatic impact on home insurance, and the price difference between new and renewed customers will be particularly large © Jeff J Mitchell / Getty Images

Not everyone welcomes the new rules. James Daley, managing director of consumer organization Fairer Finance, said people who benefited from shopping would be “worriedly shocked” by the expected rise in prices. “This is a tedious intervention that was not justified by the level of market disadvantage,” he added.

The FCA acknowledges that young customers, who are usually considered high risk by insurers, are more likely to be affected by price increases as a result of the intervention.

For those who have driven the reforms, the priority is to ensure that the insurer implements the reforms. Upton of Citizens Advice said, “We will put a lot of pressure on the FCA to ensure that companies comply.”

As part of the change, regulators have requested that insurers provide more data so that they can monitor compliance. The FCA said it would “carefully monitor” how insurers respond and seek clarification from insurers as they strive to ensure a fairer market. “Companies can still offer customers cheap and good deals, but people don’t have to switch just to avoid bad deals,” he said.

Without the impetus for loyalty penalties, analysts are closely watching consumer reactions. Regulatory modeling suggests that switching is reduced. It will hit one of the major business sources of price comparison websites. However, it should be noted that it takes time to uncover the impact on the online brokers used by the majority of insurance customers.

De’Ath said he believes that customers who are always shopping are “most aware” of changes and will step up their efforts knowing that it can be difficult to find significant deals. rice field.

“Over time, switching can be somewhat reduced,” he added. “But it will burn more slowly over the years than any kind of big bang.”

Shake-up of UK motor and home insurance promises £4bn in savings Source link Shake-up of UK motor and home insurance promises £4bn in savings

The post Shake-up of UK motor and home insurance promises £4bn in savings appeared first on California News Times.

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