UK loyal customer price rises 'unsurprising': GlobalData

UK loyal customer price rises ‘unsurprising’: GlobalData

6 June 2022

Reports that loyal UK motor insurance customers face premiums up to double the price of those paid by new customers despite regulatory reforms are unsurprising, analytics firm GlobalData says.

Senior Insurance Analyst Ben Carey-Evans says the motor market is very competitive and attracting new business is extremely dependent on value.

“The prominence of price comparison sites, and consumers being extremely likely to select the cheapest policy from the first page, means it is difficult for insurers to make profit on new business,” he said.

The Financial Conduct Authority (FCA) introduced new rules from January to prevent dual pricing practices that involve increasing premiums for existing policyholders at renewal over years, while below-cost offers are made to attract new customers.

But The Guardian says in a report on its website that loopholes in the new rules around when and how customers apply for a quote mean customers are still paying more to renew an existing policy.

GlobalData says its research has shown that many people continue to renew with the same insurer, and a significant percentage don’t shop around.

“A sizeable proportion of consumers are facing higher premiums than they should so it is advisable to at least check for other price options at renewal, especially given the cost-of-living crisis we are in at the moment,” Mr Carey-Evans said.

The UK motor insurance industry’s direct written premium (DWP) is projected to grow at a compound annual growth rate of 2.3% from £18.4 billion ($31.9 billion) in 2021 to £20.6 billion ($35.7 billion) in 2026, according to GlobalData.

The motor insurance industry was hit by lockdown restrictions last year, but the inflation rate and the gradual lifting of restrictions is set to support a recovery this year.

“Motor insurance prices are expected to increase as the industry faces high inflation and compliance costs related to FCA pricing reforms,” Insurance Analyst Bharat Khamari says. “As companies look to re-balance premiums prices for existing and new customers, it would result in a jump in the DWP in 2023.”