Consumer Panel research finds that majority of consumers experienced a price increase for their insurance renewal across products. Some consumers face extremely large price increases on renewal. 85% of consumers who negotiated their car insurance renewal price with their existing provider were able to secure a reduction in their renewal price.
The Financial Services Consumer Panel has today published new research[1] which looks at the experiences of consumers when renewing existing insurance contracts, specifically: how the renewal price compared to the previous year, what consumers were doing in light of this and what outcomes consumers were experiencing.
As a result, in a paper[2] also published today, the Panel is asking the FCA to act to ensure that consumers renewing their insurance receive a product that is designed to meet their needs, characteristics and objectives and that they achieve a good outcome without having to shop around, negotiate or change their cover. The FCA should also ensure that firms support consumers (including those who are vulnerable) in making informed decisions and ensure that regulation enables consumers and consumer groups to request full disclosure of the data fields used to determine insurance premiums.
The Panel commissioned Thinks Research to conduct a bespoke online quantitative survey (informed by a series of cognitive interviews) with a nationally representative sample of 2,000 consumers. This survey focused on consumers’ experience in relation to car, home and travel insurance renewals.
Findings showed that the majority of consumers surveyed experienced a price increase for their insurance renewal across products, with 80% being offered an increased premium for car, 72% for home, and 51% for travel insurance at renewal. The mean average percentage change in price was highest for car insurance (27% increase), followed by home (22%), then travel (13%). Beyond these averages, some consumers faced significant price increases at renewal; for example, in the top quartile (top 25%) by premium increase, those renewing their home insurance experienced an increase of at least 31%, with the average for this cohort being 72%. For car insurance, customers in the top quartile were subjected to a premium increase of at least 40%, with the average for this group being 74%.
The research showed that price negotiation paid off, with 85% of consumers who negotiated their car insurance renewal price with their existing provider able to secure a price reduction-but this was the least likely action to be taken by consumers.
Panel Chair, Helen Charlton, said: “It is important that consumers, including vulnerable consumers, receive suitable products, are supported in making informed decisions and have all relevant disclosures available to them, especially when prices increase on renewal. The Panel’s report sets out recommendations for the FCA to improve outcomes and value for money for consumers in relation to insurance products. The Panel believes the FCA should explore the consequences of high renewal pricing, such as increases in uninsured consumers, under-insurance, and the impact of increased switching. We look forward to engaging with the FCA expeditiously on the topic of value for money given their latest publication of General Insurance Value Measures[3] data.
In closing, I wish to express sincere thanks to Panel members Jonathan Hewitt and Johnny Timpson for their significant contribution to the Panel’s work, in providing their invaluable time, skills and expertise in the commissioning and delivery of this important project.”
ENDS
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Consumer Panel Secretariat email: [email protected]
NOTES TO EDITORS:
- The Consumer Panel is a statutory body under the Financial Services and Market Act 2000. The Financial Services Authority originally established it in December 1998. The Panel advises the FCA on the interests and concerns of consumers. The Panel is independent. Its views do not represent those of the FCA.
- The emphasis of the Panel's work is on activities that are regulated by the FCA, although it may also look at the impact on consumers of activities outside but related to the FCA's remit. More information about the Panel's work is available on its website: www.fs-cp.org.uk[4] or via its Twitter account[5]
Find full membership of the Consumer Panel here[6].