The issues are well known and are by no means confined to the insurance industry. Consumers – and the organisations that claim to represent them – are increasingly angry at the heavy discounting customers enjoy in the first year of switching their business and the “loyalty penalty” they suffer if they do not shop around every year. This lay behind the Citizens Advice super complaint to the Competition and Markets Authority last September, which fingered five markets – home insurance, mobile phones, broadband, mortgages and savings.
It followed that up in April this year with some detailed research on the home insurance market, which found that household insurers make all of their profits of around £1bn a year from customers who have held policies with one company for six years or more.
Home insurance has been the focus up to now but the CMA has made it clear that it wants to look beyond household insurance, identifying motor, breakdown and health insurance as other areas of concern.
In the meantime, the FCA launched its own market study on pricing at the end of last year on which it has been consulting.
With the dual pricing noose slowly tightening around the insurance industry’s neck, this article focuses on the implications for insurance companies and the future of pricing.