New rules came into force on 1st April 2017 compelling insurers and insurance intermediaries to provide you with an easy way to compare the renewal premium that they are offering with the premium that you paid last year. We have always sent a copy of the previous year’s schedule, which shows the premium you paid, along with a renewal invitation letter showing this years proposed premium so the new rule has made very little difference in our case.
All we have needed to do to comply with the new rule is bring both sets of figures, that we were already providing, together on the letter. We have also designed a new renewal details sheet setting out exactly what you have on cover and the sums insured etc that you have stated. What the FCA hope that you will do is check that your premium is not creeping up and that the cover you have is appropriate for your needs before renewing.
Why have they made this change? The main theory in the industry on why this change has come about is the practice, common with many of the larger insurers, particularly those on price comparison sites, to have what is known as dual pricing. What they do is draw you in with a cheap deal the first year and then increase your premium for the second year by 20 or 30% and if you stay with them for another year they charge you even more. It is exactly the strategy used by broadband and energy suppliers. They even have statisticians working for them predicting what percentage of people will stay depending on the percentage increase that they apply. It is rumoured that some can predict the likelihood of you staying with them so in effect the more loyal you are the more you pay.
The FCA will not outlaw dual pricing, they will not get involved in setting rules about how insurers set prices. They are therefore left with market competition driving prices down but this only works in a dual priced market if everyone shops around every year and therefore always gets the lower price. We therefore are obliged to remind you to shop around and implore you to do so if you have been with us for four years or more.
Of course you could come to a caravan insurance intermediary like Caravanwise. We do not go on comparison sites, we do not dual price. We prefer for our loyal customers to get the best price, or at least as good as our new customers. We will still remind you that you can shop around but hope that our pricing policy, 5 star caravan insurance cover and the quality of our service will persuade you to stay with us for many years to come.service
The other part of the new rule is that we must provide you with information about your cover and remind you to check that the cover offered is suitable for your needs. We have always done this but it is worth restating. If you have not renewed your sums insured for a few years there is a good chance, on property insurance like caravan insurance, that you could be over insured and therefore be paying to much premium. Or if you have your caravan insured on a new for old basis, if the price of a new replacement has gone up over the years, you might be under insured. It is too late to find this out if you are every unfortunate enough to have a total loss requiring a new replacement.
In short the new rules will have very little impact on how we do renewals as we have always provided full information and encouraged our clients to check their cover. For insurance providers that use dual pricing as a business strategy it will hopefully have an impact. That is what the FCA is hoping anyway. This is the first new prescriptive rule that they have implemented for general insurance and may be the start of a more prescriptive direction moving away from simply setting us the requirement to treat customers fairly.