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.
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. **
*The impact of new price walking rules on the insurance industry (confused.com)
** The Rise of Essentials Car Insurance Policies | Fairer Finance
Our ask
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.