October 10, 2019

Ripping off policyholders who neglect to change insurer every year is a bit like smoking crack cocaine. That’s the view of Ian Huge, CEO of data analytics company Consumer Intelligence. And you’d assume he knows what he’s talking about.

The problem with crack cocaine, it seems, is that, once you’ve developed a taste for the crystalline off-white powder, it’s hard to kick the habit. Huge reckons quoting low to switchers while fleecing loyal customers has a lot in common with use of the infamous rock candy.

Or maybe so-called ‘dual pricing’ is more like taking performance-enhancing drugs. Athletes know they shouldn’t really dabble, but they look around, see everyone else doing it, and conclude – not unreasonably – that they’ll never compete and win if they’re the first to go clean.

It’s been going on for years, of course. Price comparison sites like Compario the Monkey Super Meerkat have been urging punters to shop around more or less since time began. But we can’t blame them entirely for our tendency to focus on price. That’s natural enough in a world where money doesn’t grow on trees.

It has recently come to the notice of regulatory ‘body’ the FCA that the interests of motor and household policyholders are perhaps not being best served by the industry as it is currently constituted. Penalising loyalty, the FCA has now suspects, might be a bad thing.

Naturally enough, the regulator’s plans to grasp and neutralise the dual pricing nettle again tend to focus on price. Cold turkey type solutions like outlawing dual pricing altogether or banning automatic policy renewals have startled and alarmed insurance folk.

But if insurance providers now urge caution on the regulator’s part, it’s not just because they’re pathetic sweaty addicts, quaking at the proposed denial of their latest fix. It’s partly, at least, because they’re starry-eyed idealists dreaming of a world where insurance isn’t all about price.

An unnamed broker, quoted in industry journal Insurance Rage this week, warned against anything that might ‘encourage people to shop around based only on price without taking account of value and service’. Presumably the fear is that the FCA’s well-meaning attempts to stop less fickle policyholders paying more might simply exacerbate our obsessive preoccupation with paying as little as possible.

‘Just moving for the sake of saving a few pounds without looking at the other elements of the offer,’ the anonymous broker warned starkly, ‘may be counterproductive.’ And, let’s face it, counterproduction is the last thing the insurance sector needs right now.

Insurers too are gravely concerned that the denial of their drug of choice might have unintended consequences. Banning automatic renewal might prompt customers to save themselves from loyalty abuse, but according to one insurer spokesperson, it could also result in the loss the ‘vital and often legal protection’ their policies provide, should they fail to replace lapsing cover.

Similarly, taking action against dual pricing could accidentally ‘stifle competition and innovation’ which would surely be akin to jettisoning a particularly precious baby along with some not especially dirty, and actually still quite warm, bathwater. Also, another insurer has queried, what chance would there be for new entrants in a market where they couldn’t dangle cut-price premiums in front of future fleecees.

It’s a fair point, Bankstone News feels sure you’ll agree, and one the regulator will hopefully bear in mind when it decides it’s all too complicated and leaves a grateful industry in peace.


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