Growth vs Consumer Protection – Where does it end?
Depending on where you sit, the Government’s call on the regulators to support growth can be viewed as a positive or a negative idea.
Insurers and in particular, intermediaries (Brokers and MGAs) will tell you that they are swamped by regulation, with a recent BIBA article highlighting that 5.2% of insurance premiums are a result of compliance activities.
As a consultancy GreenKite see what is being done across a variety of firms at both carrier and intermediary level. Naturally each firm will have their own appetite towards regulatory risk based on the profile of their customers and products. Across the board we see firms striving to deliver good outcomes for their customers and to meet their regulatory obligations despite the challenges that exist.
Many will agree that the inconsistencies that exist in the regulations can be frustrating and even well intentioned moves by the regulator can have unintended and adverse impacts. An example of this is the general insurance pricing remedy which was introduced to prevent price walking on private home and motor insurance. The fundamental principle that customers are not penalised due to their loyalty is sound. However, whilst the remedy does not apply to other forms of insurance the FCA has also indicated that firms should generally anticipate the application of any regulation to other products where potential harm can be foreseen elsewhere.
This creates confusion on annual price increases on other products. How can it be clear harm on two products and yet not on others? Perhaps the most salient point is that despite the introduction of the price walking rules, very few policyholders are celebrating better renewal prices on their home or motor insurance and there is an argument that the new rules have not really improved things for consumers.
Cutting out the confusion will certainly help, as will simplifying the FCA rules and the recent FCA Consultation Paper has been well received, but at what point does reducing regulation become detrimental to the market as a whole? The reality here is that there are two very different perspectives to this issue; the industry feels that it is disproportionately regulated yet customers feel that they are not sufficiently protected.
The consumer advocacy group” Which” currently has a media campaign centred around rip-off insurance. By the time this article is published it may well have reached its target of 180,000 signatures in its petition to end rip off insurance.
The figures from Which make grim reading
- “Insurers are piling misery onto their customers by causing them ‘distress and inconvenience’ in nearly two thirds of complaints upheld by the Financial Ombudsman Service
- Just over a fifth (22%) of consumers trust insurance companies to act in their best interests
- Almost half (48%) of all people making a claim experienced at least one problem in their claim journey
- One in 10 people reported developing physical health problems as a result of bad service from their insurance company“
The UK regulatory structure exists due to previous systemic failings which have led to widespread harm for consumers, and despite being handed the petition on 14th May, FCA CEO Nikhil Rathi’s response via letter indicates that the FCA believe they are currently doing enough, pushing back on Which, citing examples such as the GAP market where the FCA have effected real change, whilst confirming the summer plans to publish their review into the costs of Premium Finance, and Claims handling in Home and Travel products.
Perhaps then, the more appropriate question is should firms regulatory priorities be focussed, in order to drive meaningful and impactful improvements in service and value? UK consumers clearly feel they are not receiving the appropriate service or value from their insurance products, indicating a need for change.
If you would like us to conduct an assurance review on any aspect of your current compliance activities, please get in touch with GreenKite because we offer support to firms which allows them to focus on areas which drive better customer outcomes, which ultimately is the best competitive advantage a firm can have.
