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Roundtable: Dual pricing and loyalty | Insurance Post

Loyal customers have long felt penalised by dual pricing. As the regulator and the government are promising to stop the practice, insurers discussed how to move the focus away from premiums to build stronger loyalty, at a roundtable organised by Post, in association with Webhelp

Irritation and resignation were present in equal measure when a group of insurers, brokers and technology specialists sat round the table just days after Citizens Advice launched its super-complaint to the Competition and Markets Authority over what it calls the “loyalty penalty” in five sectors, including insurance.

Originally, the meeting was supposed to discuss how to move the public conversation away from price to build greater brand loyalty in personal lines insurance. But the super-complaint blew this agenda out of the water, dragging the discussion straight back to premiums and the long-running concerns about dual pricing.

The industry is going to have to look its critics in the face and tackle this issue: the CMA is bound to investigate the complaint as Citizens Advice is one of a handful of organisations that has a special status allowing it to trigger full-scale investigations.

If imminent investigation was not bad enough, Prime Minister Theresa May waded into the debate in her speech to the Conservative Party conference a week later: “Companies charging their customers a ‘loyalty penalty’ should know: we will take action.” By adopting the language of the complaint, the Prime Minister has made it clear what she thinks the outcome should be.

For Christopher Digby, associate director at Howden Private Office, there was an air of inevitability about the investigation and this pressure for action on dual pricing: “The biggest problem for consumers has always been around existing policyhoders and new customers. So the fact that it hasn’t happened before is surprising, especially with what has gone on with the energy and utility companies.”

This feeling of inevitability and resignation was quickly replaced by mounting irritation on all sides, not least because the complaint targets five sectors – mobile, broadband, savings accounts, home insurance, and mortgages – that participants felt shouldn’t be amalgamated.

“It is unfortunate that insurance is being lumped in with certain utilities because that is devaluing the products we sell,” said Mike Crane, managing director of LV Broker.

“It is going to take some unpicking to understand which aspects of it are part of the competitive dynamics around new business, which it could be argued are healthy, and the parts of it which are about longevity [of customer relationships], which start to look more challenging,” added Crane.

Matt Cullen, head of strategy, data and analytics at the Association of British Insurers, said dual pricing was “very much on the agenda at the top level”. The ABI has promoted guidance on pricing and dealing with vulnerable customers. “The industry has done all it can while staying within existing competition law,” said Cullen, adding further collective action presented “intractable problems”.

Zurich’s head of partnerships Phil Ost said insurers were adopting the ABI’s guiding principles but these were not moving things forward: “It is backing up and reaffirming what we were already doing.”

Steve White, CEO of the British Insurance Brokers’ Association, urged the industry to acknowledge the concerns that lay behind the Citizens Advice complaint.

“You have to accept that perception is actually reality. The tabloid papers are regularly picking up stories on price differentials and the regulator is responding to this. Andrew Bailey [CEO of the Financial Conduct Authority] has made it clear that pricing and use of data are his number one priorities,” he added, noting the FCA didn’t exclude regulatory action in both these areas.

White also challenged the language being used: “It is very unfortunate that this has been labelled a loyalty penalty. It isn’t really a loyalty penalty. It is a heavily discounted new business price. We need to somehow get that out into the ether. It is just what many other business sectors do.”

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Roundtable: Dual pricing and loyalty – Insurance Post.