Plans to increase transparency in the renewal process of general insurance policies have been supported by the International Underwriting Association
Representing London Market companies, the organisation backed a Financial Conduct Authority proposal to ensure renewal notices include the previous year’s premium. But it warned that overemphasising the price of a policy could cause clients to overlook other aspects of the cover and lead to inaccurate comparisons being made.
The IUA stated that consumers are generally already well aware of opportunities to shop around for new insurance products and prices. In order to do this effectively, however, they need to consider the scope of cover on offer, policy limits and excess levels, as well as differing administration and claims services.
Chris Jones, IUA Director of Market Services, commented: “Clearly price is the key driver for many insurance purchasing decisions, but other factors are also crucial and should not be glossed over.
“Encouraging consumers to shop around purely on price could be problematic. A renewal quote for pet cover, for example, may be higher due to an ageing animal or an ongoing condition. Shopping around could easily result in cheaper policies, but many will not cover the pre-existing condition.”
The IUA also questioned whether the perceived benefits of the FCA’s proposal warrant the implementation and compliance costs for insurers which will, of course, impact the ultimate costs of policies.
According to the regulator’s own research the change would raise the number of consumers who switch to a new provider or try to negotiate a better price by only 3.2%. Yet implementation costs are estimated at around £133m and firms’ annual compliance costs could expect to rise by nearly£4m.
Mr Jones added: “We understand the reasoning behind the FCA plans, but feel that further consideration needs to be given to other factors that impact renewal decision before the proposals are finalised.”
About the IUA
The International Underwriting Association of London (IUA) represents international and wholesale insurance and reinsurance companies operating in or through London. It exists to promote and enhance the business environment for its members.
The IUA’s London Company Market Statistics Report shows that overall premium income for the company market in 2014 was £22.943bn. Gross premium written in London totalled £15.855bn while a further £7.079bn was identified as written in other locations but overseen by London operations.