Price Walking James Stewart Policy Manager
In response to concerns that customers who have taken out car or home insurance have “price walked” in to higher premiums, that is they have been tempted by a cheap initial premium only to find that, at renewal, their premium increases without their knowledge, the FCA has introduced a rule that requires home and motor insurance renewal premiums to be set at a price that is no higher than would be offered to an equivalent customer at new business. This is referred to as the equivalent new business price (ENBP). An Insurer cannot therefore discriminate against a customer on the grounds of how many years a customer has held their policy with them (i.e. tenure). Insurers in these markets will no longer be able to dual price and gradually increase premiums over time at renewal until they bear no resemblance to the premium that would be offered if the same customer was a new customer. Although it is too soon to know for sure how this move will affect prices – will Initial pricing go up or renewal premiums go down, at least the FCA guidance should create a more competitive Insurance market, less dominated by comparison websites whose whole ethos is around finding the cheapest price.
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