16th February 2020

S&P Global comments on UK personal lines loyalty penalty issues
Trend

According to the UK's Financial Conduct Authority(FCA, about 6 million policyholders are paying a combined penalty for their loyalty to their insurers of about £1.2bn a year.
The FCA's interim report suggests that it may take a more interventionist approach than it has before, and media interest has been aroused by the vulnerability of some of the most affected customers.
Faced with the possibility of price controls, we are already seeing new, more customer-friendly products being launched by the industry's early movers.
In a new report published, S&P Global Ratings notes that although UK home and motor insurance does not seem an obvious place to start looking for social risk, the sector's business models have increasingly courted conduct risk. In September 2018, the FCA launched a market study to investigate renewal pricing practices in UK retail insurance.
According to the interim report the FCA issued in October 2019, it found a market that does not work well for customers. For example, most providers employ "price walking," attracting consumers by offering a low first-year premium, then increasing rates year-on–year thereafter. As a result, one in five policyholders are paying 50% more than the going rate for their home insurance.
Of the customers being overcharged, a significant proportion are considered vulnerable, because of illness, recent major life events, or limited money management skills. We expect the media coverage surrounding the issue of renewal pricing, particularly its impact on vulnerable customers, to further increase social risk for UK motor and home insurers.

S&P Global Trends(513 articles)
FCA Trends(191 articles)