In early 2021, the regulator announced the implementation of target dates for rules that might be introduced to help curb consumer harm as far as general insurance pricing practices are concerned. Initially, the FCA only gave one deadline, which was four months from the release of the policy statement, however this has since been revised and the FCA has asserted that it will be giving companies until the end of September to implement any new regulation surrounding systems and controls as well as product governance; and until the end of 2021 for the pricing and auto-renewal remedies and reporting requirements.
But insurance firms remain concerned that the timeline (which now gives organisations seven months to prepare) for implementation is still too optimistic. New research issued today by reinsurer Swiss Re demonstrated that almost two-thirds (60 per cent) of UK insurers believe that a minimum of nine months is needed for successful implementation of the proposed changes.
Insurers concerned over pricing
Of the key areas concerning insurers highlighted in the survey, pricing is seen as the element requiring most effort ahead of implementation, with more than half (57 per cent) of those asked citing this view.
Jason Paschalides, Senior P&C Analytics Solutions Manager at Swiss Re, said: “Since the FCA proposed its plan to fix renewal price walking back in September, the UK market has been awash with speculation over exactly how and when the new rules will be implemented - and whether insurers will have time to put robust infrastructure in place to be fully compliant with the new rules. While the extended timeframe goes some way to alleviating the pressure, our study indicates that the implementation period could still be too short to be achievable for many players – particularly on the pricing side.”
He continued: “Assuming lower pricing differentials reduce switching in the market, it’s going to become much harder for insurers to grow their existing portfolios. In response, it’s likely we’ll see strong household names moving to differentiate brands within their business in order to allow for different pricing in different segments of the market. We expect a common route will be firms choosing to adopt a PCW focused brand, as well as a direct brand.”
A race to the finish line
Paul De’Ath, Head of Market Intelligence at Oxbow Partners, also commented on Swiss Re’s findings: “It’s clear that the current product set is unlikely to meet future customer demands. As we have seen in other fast-moving industries such as tech, the winners may not be the companies that come up with the best idea first but those who have the ability to react quickly and deliver it to customers.
“With the FCA deadline fast approaching, this is certainly not the time for insurers to rest on their laurels. Ensuring you are well poised to compete with others in the market will be crucial as we move forward.”
Elsewhere, the UK Chartered Insurance Institute (CII) also expressed its concerns over the deadline set out by the FCA. “While we welcome their ambition for full [implementation] to take place by the end of the year, there is some concern that this may not be enough time for firms to get all practices in place,” said CII) Policy and Public Affairs Director Matthew Connell. “It’s important that the regulator continues to take the current pandemic into account and remains flexible in their approach, to ensure we get the right consumer outcomes. The CII will continue to work with the regulator and our members to ensure these measures are implemented seamlessly.”
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