Insurance Rules Changes From Jan 2022

Former_MSE_James_F

Important changes to the way insurers charge new and existing customers are on their way, which will put an end to the 'loyalty premium' borne by consumers, says MoneySavingExpert.com founder Martin Lewis.

Read the full story here:
'Martin Lewis: The BIG insurance rule change is coming - what you need to know before 1 Jan'

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Sandtree

Bit of old news and probably too early for the call to action.

@MSE_James_F - given you mention cashback... the regs state that any financial incentives have to be considered for the renewal price (ie if new business get a £25 gift card that £25 has to be taken into consideration when deeming that new and old are getting same price) but non-financial incentives dont have to be (eg free cuddly toy). Any views on how cashback will be viewed given its origin as marketing budget but near mainstream acceptance these days?

Havent looked at the regs in detail, though had picked up on the channel specific matching... what provisions are there around policy wordings/products... ie if I make a small change to my wording and quote my existing customers on their existing old wording at renewal can I avoid having to have parity between new business and renewals because they arent the identical product?

Cooky70

Had my House Insurance renewal - increased of over seven hundred pounds (was between 300 and 350 last 3 years, with same insurer).  Reason for increase was due to the new Insurance rules.  Strange as the comparison site prices are still around 300 - 350 and the same insurer is still cheaper via the comparision sites.  Not sure how these new rules have made it fairer.

dunstonh

Cooky70 said:

Had my House Insurance renewal - increased of over seven hundred pounds (was between 300 and 350 last 3 years, with same insurer).  Reason for increase was due to the new Insurance rules.  Strange as the comparison site prices are still around 300 - 350 and the same insurer is still cheaper via the comparision sites.  Not sure how these new rules have made it fairer.

They have made it a lot fairer.    

There have been two models effectively for years.    Those that didn't have early year discounts and those that did.  If you shopped around each year and bought a policy with an early year discount, then the insurer was often losing money on those policies.     However, they would put the premiums up for those that renewed to cover it.   That is unfair.

The new rules prevent one group cross-subsidising the other.  However, there are some anomalies that have yet to be ironed out.

Such as different versions of a policy issued by the same provider.   Many providers will operate a version of the product for retailing via comparison sites that is cost-focused and has bits of cover removed to keep the price down.   They will then have a version for retailing via other distribution methods that look at quality of coverage rather than price.   Sometimes they offer all versions via the comparison site but if you are price focused rather than quality-focused, you will only see the lower quality versions.     Also, over the years, a version of the product may be replaced with a new version.   

So, whilst you are looking at a brand name quoting £x for renewal and £y on the comparison site, you may not be comparing the same version of plan and coverage may be different.

There have also been some reports of providers not being able to get their quote systems updated in time.

I was reading that the expectation is that some providers will look to get rid of their legacy book of old versions and go with modular products in future.  A bit like what has happened with investments and pensions.  i.e. they only have one product and can amend that product over the years without having different versions.    To achieve that, they can pro-actively move people over to their new version at renewal but that is a bit harder with insurance than it is with investments and pensions.  Or they can put the price up on the old versions to encourage people to move off them.     Although the article also said that some providers may try and circumvent the spirit of the rules by increasing the number of versions available. i.e. current product has the same price for new business and renewals but the previous version is no longer offered for new business and starts seeing the price increase.  And they can do that as it's not the same product and as it's not available for new business, they are not offering a different price.

It will take a few years for the pricing to settle following this change.   The pricing models are guessing consumer activity and they wont know for a few years how it changes.   However, with the loss making plans out of the system, in theory, the price for renewals should drop.

csgohan4

I think the prices will rise for everyone, the yearly haggling is now going to be a thing of the past and in a way much easier to find an insurer without phoning your old one.

Those who had it cheaper every year from haggling will lose out and those who auto renewed will win, So prices rise for the former and cheaper for the latter, it irons itself out in the long run