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August 30, 2024
In an interestingly timed publication, soon after the FCA Value Measures data publication and following the publication of the FCA Thematic Review TR24/2 (covered in last week’s update) , the FCA’s Financial Services Consumer Panel has published a research paper about consumer experience with insurance renewals. Although the paper itself is dated February 2024, the Panel has published commentary summarising the findings of its research and making a number of recommendations.
The Panel commissioned research into consumers’ experience of home, car and travel insurance pricing at renewal, engaging 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 research found that the majority of consumers experienced price increases - averaging 27% for car, 22% for home and 13% for travel insurance. Beyond these averages, some consumers faced even more significant price increases at renewal.
- The majority of consumers have experienced a price increase for their insurance renewal across products.
- The mean average percentage change in price is highest for car insurance (27%), followed by home (22%), then travel (13%).
- Mean averages hide the extremes, and some consumers are facing extremely large hikes.
- Consumers are taking action in response to higher renewal prices (74% who renewed their car insurance, 64% home, 56% travel). In particular, they are ‘shopping around’ or changing provider, followed in third place by negotiating the price.
- Taking action does pay off and reduces prices for most.
- The action most likely to pay off is the one least likely to be taken, and possibly the hardest to do: negotiation.
- Consumers tend to feel satisfied with their new insurance prices and believe they are getting value for money, but those who have taken action to get the price reduced are, interestingly, less likely to feel this way.
- Dissatisfaction with prices and deals is higher amongst those who have negotiated compared to other actions taken at insurance renewal.
The summary publication contains seven separate recommendations, including that the FCA should consider the consequences of high renewal pricing (e.g., increases in uninsured consumers, under-insurance and the impact of increased switching) and that the FCA needs to pay close attention to pricing in relation to insurance products, especially with regard to mandatory insurance such as motor, home (for mortgagors) and professional indemnity insurance, how commission is disclosed, and the degree to which commission influences prices in insurance premiums.
