Introduced in 2022 by the Financial Conduct Authority (FCA) for the car and home insurance markets, the General insurance pricing practices rules (GIPP rules) require insurers to quote renewal customers the same price as new customers who share the same risk profile for the same product, even if they have been with their insurer for several years.

With the GIPP rules, the FCA aimed to address price walking, providers increasing renewal prices for long-standing customers who received no associated increase in product value.

Unfortunately, we fear the rules have delivered unintended consequences:

  • Premiums have soared for all customers since they came into effect. Increases can’t be solely attributed to the rules, inflationary pressures have driven up premiums too, but our members’ data indicates they have played a part.

  • Switching has fallen - Many people could make significant savings by shopping around, but they are less likely to switch if their insurer quotes the same price or less than for the previous policy. They lose incentive to consider other options and miss out on savings.

  • Prices are equalising - Price may no longer be as important in driving consumer decisions. GlobalData Research* showed the difference between the largest and smallest average car insurance fell from 37.7% in 2021 to 11.4% in 2023. Options to make real savings in the market have fallen, adding to cost-of-living crisis pressures.

  • Consumers going cheap - evidence is growing that consumers, particularly in lower-income groups, are opting for lower cover levels due to soaring premiums. Sales of bare-bones policies went up after the GIPP rules were introduced, and more people having these policies will mean less overall cover and pooled risk long-term. **

*GlobalData research info here

** Data source here

Our ask

TBD

Our members believe the GIPP rules demonstrate unintended consequences of applying a rules-based regulatory approach and that principles-based regulation better safeguards customer value and choice.

The FCA’s new Consumer Duty, which sets higher standards for financial firms, also sets the expectation that they put consumer interests first.

We believe price walking could have been tackled through the principles of the Duty, which requires providers to ensure products represent fair value for consumers.

We urge the regulator to review the GIPP rules, focussing on whether their intended effects are evident in the market two years after their introduction, if not, we ask them to consider XX.

Buying or renewing a policy is the main reason many people engage with the insurance market.

As intermediaries between providers and consumers, our members help them find the right product at the right price when buying or renewing a policy. We know that enabling consumers to switch easily between financial products encourages them to research and compare options, incentivising insurers to innovate to deliver value and choice.

But even minor switching requirements can prompt policyholders to stick with a policy when they could get a better deal. Insurance industry practices can often, if unintentionally, discourage switching, making the consumer journey more difficult than we believe it needs to be.

We want to ensure consumers feel confident to shop around and switch their insurance deal, empowered by good industry practices.

This is why we are encouraging insurance providers and their regulators to make it as easy for customers to cancel a policy and switch to a new one as to enter that policy in the first place.

Our ask

We are asking regulators and insurance providers to remove barriers to switching by:

  • cutting bureaucracy, such as requiring customers to call their provider when they want to switch.

  • ending renewal traps, practices that obscure how to prevent policy auto-renewal.

And we encourage them to:

  • keep the application process simple, enabling potential customers, particularly those buying home insurance, to evaluate products without answering lengthy and complex sets of questions.

  • use open data where possible, access existing customer information to shorten question sets for those taking out a new policy.

  • make cancellation easy - simplify the consumer journey at cancellation.

We will play our part by continuously investing in innovation to deliver consumer value and choice.