Price walking ends this week in the UK
Telematics can help
The UK P&C market is bracing itself as the first deadline set by the Financial Conduct Authority (FCA) fast approaches. Insurers are expected to implement a wide raft of new changes, including a new pricing remedy, the cancelation of automatic renewal and a reset of product governance. The new FCA-inforced pricing remedies will need to be adopted by insurers starting October 1, 2021. Insurers will be expected to have:
- Reviewed their business models/plans
- Reviewed and potentially rethink their pricing strategy
- Considered how they will communicate new pricing strategy to existing customers
- Reviewed their underwriting guidelines
Insurers without an active mobile telematics program will find themselves scrambling to meet some of the new requirements. Many underpriced their first quote to make their offer more competitive, most do not have any information on how individual risks changed between the beginning and the end of a contract.
How can insurers respond to the new FCA guidelines? Accenture suggests that insurers must race to implement fundamental changes to their business model. A key challenge will be pricing in a way that reflects customer lifetime value from the outset, using more sophisticated pricing algorithms to adapt to real-time changes in the market.
For many UK insurers using mobile telematics, this won’t be a problem — mobile telematics enables them to get the best risk data at the point of quote, renewal, and any time in between. So the price is right, the value is fair, and customers are delighted.
The industry as a whole needs to pay attention to the new FCA rules. The Association of British Insurers says it’s vital the new rules be applied across the whole insurance market. This includes price comparison websites and insurance brokers, with a uniform level of supervision and monitoring.
There is some level of fear that insurance prices could go up. The FCA recognises their interventions could lead to price increases for consumers who regularly shop around. However, these pricing remedies should ensure all customers get fair outcomes from competitive insurance markets.
Let’s talk new connecting insurance pricing models
These new FCA rules can be a challenge for UK insurers. If you want to discuss how new connected insurance pricing models work and how you can implement programs for all segments, rapidly and at low cost, contact us today.