Companies aim to reduce the gap between new and existing customers' premiums.
Insurance firms have announced a new plan to reduce ‘excessive’ differences between premiums for new and existing customers.
The Association of British Insurers (ABI) and British Insurance Brokers Association (BIBA) have revealed a list of ‘action points’ that, it is hoped, will see the gap between new customer premiums and long-standing customers’ renewal prices contract.
Under the scheme, members of the two industry bodies are pledging to take preventative measures that mean customers’ tendency to shop around at renewal time does not cause price differences that ‘unfairly penalise’ loyal customers.
They will also assess the fairness of their pricing strategies, while insurers will review their pricing approach for customers who have been with them for more than five years.
The plan applies to motor, travel and home insurance, but pet and health insurance are not included.
ABI chairman Andy Briggs said: ‘Insurers do a great job for their customers, providing peace of mind and financial help when they most need it, but the renewal market simply doesn’t work where loyal customers get charged much more than new customers.
‘Given many consumers expect to get cheaper insurance when they shop around, there is no easy solution. These new guiding principles and action points are a positive initiative by the ABI and BIBA members to demonstrate that the whole industry recognise this is an important issue that needs to be addressed.’
Lord Hunt of Wirral, BIBA chairman added: ‘It is part of the DNA of insurance brokers to put the best interests of the client first. That is why I am so delighted that insurers and brokers have come together for the benefit of our established and loyal customers, setting out a positive path forward on renewal pricing. I would encourage everyone within the wider market to join with us in adopting these guiding principles and action points.’