What now for the protection insurance sector?

Caring for customers 

The FCA’s final General Insurance Pricing Practices Market Study was published in September 2020, a consultation has been conducted and the market awaits final rules.

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The pricing proposal is as follows – “Where a firm offers a renewal price to a consumer, this should be no greater than the equivalent new business (ENB) price that the firm would offer that consumer”.

To be fair to banks and general insurers, one of the drivers of the situation was the increasing influence of comparison sites. The pressure to be at the top of the tables can be intense.

An increasing number of price-sensitive customers have benefitted from being active switchers but generally, the costs to other customers have come to be regarded as unacceptable.

The situation with pensions and investments is slightly different. These are long term investments and so any pension or investment firm that has been in operation for any length of time is likely to have a legacy book often built up when charges were higher and when contracts had a different structure.

Yet we are also seeing moves to cut charges, encouraged by regulation but also many firms wanting to do right by their investors.

If that is the broad context, what about protection?

Well, it has some of the characteristics of the products mentioned above. Protection can be price sensitive. It is long term. It has felt the wrath of consumer campaigners in the past though mostly focused on claims turned down.

One difference is that protection is mostly intermediated and not just by comparison site algorithms but by financial advisers.

Keeping it fair for all

But it seems relevant to ask does it have the potential to discriminate against longer standing customers and if so, should it concern advisers?

Our answer is yes to both, because we can see a significant risk that the older part of the protection book can slowly become out of date if the cover is not updated for all customers.

It could also have a knock-on impact on claims if new customers are covered for some aspect of a condition and long-standing customers are not.

And for those who suggest this is a minor detail, we would ask what a longer-standing customer’s expectation would be, were we to ask them?

We can see from the above examples, that a market can evolve in ways that lead to unfairness.

That strikes us as an important debate for the industry to have now because customers' expectations and concerns may have changed. 

If we do see increased interest from the public, whether prompted or unprompted, we think the protection sector should not take this for granted.