Three cheers for the CII in doing this! It is way overdue for the industry to collectively address these issues but they are up against real commercial problems which have developed over decades.
Let's be very clear about what is happening here...
66% of customers buy car/home insurance through comparison sites which encourage price as the only or near only basis for comparison. Advertising on a minute by minute basis from the insurers and the comparison sites queue up to scream only one message CHEAPER PRICE!
To be successful with new business, insurers have to write the year 1 policy at a loss/breakeven - "New customers only" pricing. Therefore, private motor insurance has mainly been written at a loss for the last 25 years,
With a 66% churn rate and most of the policy set up costs being in year 1, the overall costs for all policyholders across the market goes up.
The result is that policyholders pay the price in subsequent years - the "loyalty tax"
What would happen if insurers broke the vicious cycle, as the CII suggests and started to examine how to increase retention through a massive focus on behavioural insight, realtime analytics and decisioning, AI, proactive and even preemptive retention activity and "segment of one" personalisation?
I saw how the teleco industry adopted just this approach some years ago and the results were startling. Massively reduced churn, optimisation of customer retention for the best customers and a bottom line effect that could not be ignored in the P&L reports hitting the board room table.
Very soon a major insurer will adopt this in their mainstream operations and the rest will have to follow.
Perhaps then we can get away from this vicious circle of bad behaviour which destroys the industry's good name.
Just how confident are consumers in the insurance sector? The CII is attempting to answer the question with the launch of its new Public Trust Index. The index delves into research with insurers, regulators, public bodies, SMEs and, most importantly, consumers, examining what those buying insurance actually think is important and comparing that to their perception of insurers’ performance. In its first index, the CII found that the main issue for consumers is the lack of perceived loyalty from their insurer – something chief executive Sian Fisher delved into as part of her most recent column with Insurance Business. Consumers are, it suggests, “fed up” with retail insurers offering cheaper deals to new customers than they are offered at renewal – a marketing technique known as “dual pricing.”