“This announcement is significant as it is the first tangible output from the FCA’s focus on behavioural economics. The industry can certainly expect to see further rules in this area when the full report is released later this year.
“Ultimately this is a step in the right direction to improving trust between insurers and their customers. Our own research indicates that just 34% of UK general insurance customers believe that their customer experience has improved over the last year.
“In principle, ensuring consumers are provided with straightforward and easily comparable information is positive. However, as always, given the complexity of insurance risk and the simplicity of the measure, this figure alone may not give discerning consumers all the information they may want.
“It is common for premiums to change from year to year as there will be differences in risk from one year to the next. For example, as a customer ages, they may become more or less risky. They may accrue or lose their no claims discount. Product changes and inflation may have also an impact on the expected costs of claims, and therefore the premiums being charged. Furthermore, the comparison does not take into consideration discounts that may be available to new customers.
“To enable the new rule to give customers real information, insurers must go beyond providing the previous premium figure and proactively educate customers around how their premium has been calculated, as well as the overall benefits they receive to provide a more informed comparison.
“Successful insurers will be those who build the highest level of trust with their customers, and transparency on renewal pricing is just one element of this.”
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Simon Chan, PR Assistant Manager, KPMG
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M: +44 (0) 7747 564 737
KPMG Press Office: 020 7694 8773
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with approximately 11,500 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.