James Daley

By James Daley

There’s been a lot of attention on dual pricing in the insurance market over the past year. Media campaigns, FCA market investigations, the Citizens’ Advice super-complaint – all highlighting the problem of loyal customers paying more for their insurance than those who have the time and inclination to shop around.

The industry reacts

In response, we’ve seen the launch of Aviva Plus, and the news from Saga that it plans to launch products with prices fixed for three years.

These initiatives from the industry are to be commended. But it’s unlikely they’ll change the market as a whole.

Aviva is investing heavily in advertising to bring in customers directly. While Saga will be cross-selling to its book of holiday and other financial services customers.

Neither of these companies are trying to make their new products work in the comparison site world. Because they wouldn’t.

To write business on the aggregators, you need to have a cheap enough price to appear near the top of the results screen. And that means writing business at a loss in year one, breaking even in year two – and only making a profit on those customers who stick around for year three and beyond.

It’s not clear what the FCA plans to do to fix this problem. My instinct is that as a first effort, the focus should turn to better disclosure, so that customers are given clearer information on how much they’re paying compared to the wider market – and given easier ways to switch.

If that was done properly, it would ensure that people who continued to pay more than they needed would be doing so consciously – time poor, and perhaps not as price sensitive.

But it wouldn’t solve the issue of trust. People would still feel let down by insurers who continued to ratchet up prices – even if they knew they could switch.

Transparency, loyalty, honesty

Perhaps one part of the solution could be more data around how companies treat their loyal customers. If new customers could see what average price rises in years two, three and beyond looked like for each insurer – at the time they were buying cover – that may encourage some providers to take a longer term view.

One thing’s clear. The current market dynamics are disliked by most customers, as well as most insurers – and it’s a shame it’s taken super-complaints, media campaigns and market investigations to get any kind of action from the industry.

I’d like to see companies being braver about admitting some of their market failures – even if they are partly complicit in the way things are currently working. Aviva and Saga definitely deserve some credit for putting their money where their mouth is.

Pricing problems

And dual pricing is just one issue of many in the insurance industry that needs to be addressed. We’d like to see a full and frank debate about how insurers price, and what data is acceptable to use.

Over the last few months, we’ve been looking for a sponsor for our work, but most companies shy away from it – worried they may not come out looking squeaky clean. I don’t think that should be a concern. There’s much more loyalty and brand value to be won by taking a stand on behalf of consumers – and we need some changemakers to step forward and work with organisations like ours to get the industry back to a point where customers trust and value it.

If the industry doesn’t take the lead in trying to fix the market’s problems, it can’t complain when the regulator steps in with heavy-handed solutions.