Market reacts to FCA crackdown on dual pricing

The insurance sector has issued warnings and welcomes in response to the FCA’s proposed changes to motor and home insurance pricing for existing customers.

Dominic Simpson, vice president and senior credit officer at Moody’s Investors Service, said: “The FCA’s proposals to tackle its concerns about UK general insurance pricing are credit negative for home and motor insurers’ revenues and profit margins. The proposal to cap renewal prices by tying them to the equivalent new business price will restrict insurers’ ability to increase prices amidst rising claims inflation.”

Mohammad Khan, UK general insurance leader at PwC UK, warned of unintended consequences.

He said: “The FCA’s proposed remedies to pricing and renewal processes will reward loyal customers but could increase the cost of insurance for others.”

He added: “In particular, consumers who regularly shop around for motor and home insurance will likely see premiums rise. For some young drivers who regularly shop around, their new annual insurance premium may rise by more than £50.”

This view was echoed by David Miller, financial services partner at KPMG. He said: “Whilst there are potential consumer savings in the long-term, there is a risk of short-term pricing increases for new customers. The unintended consequence of these measures could also have significant impact on the wider insurance ecosystem, as consumers are less incentivised to shop around, impacting insurers’ distribution strategies.”

The British Insurance Brokers’ Association welcomed the FCA’s proposals to stamp out dual pricing.

Steve White, CEO at BIBA, said: “Our broker members always aim to offer their customers insurance that meets their needs both in terms of price and cover. Their long-held concerns about dual pricing will be addressed by the FCA’s proposed measures and we look forward to working with the regulator constructively.”

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