Colm Holmes applauded the way the FCA consulted the industry on dual pricing and showed little concern about the impact of new rules
Aviva’s general insurance boss says the British giant is “very supportive” of what the UK’s Financial Conduct Authority (FCA) is doing to address the issue of dual pricing in the country.
CEO Colm Holmes’ comments, made today at an industry event, came laced with a warning there was a “real risk” that the “unintended consequences” of too harsh a crackdown on renewal pricing will make certain risks uninsurable in the market.
The industry’s reaction to the proposals laid out by the regulator in its interim report in October 2019 have been mixed, but this is the first time Aviva has made a statement in support of them.
Speaking at the Insurance Roadshow 2020 event hosted by Fitch Ratings in London, Holmes said: “A lot of people thought all insurers would be against this, but Aviva is actually very supportive of what the FCA is doing, and how it’s done it.
“It has engaged with insurers and the ABI (Association of British Insurers). It’s gone away, thought about it, released its initial views last October and then re-engaged with insurers again.
“What it’s recognising is the fact that motor and home insurance are not hugely profitable markets in the UK, so anything you do to impact the renewal premium of an individual will be felt by someone else.
“There’s a real risk that the unintended consequences of dealing with this too harshly will just mean that certain risks will become potentially uninsurable.”
Aviva warning about crackdown going too far echoes others in the industry
The insurance industry is bracing for the release of new rules from the FCA after the regulator found in its interim report that roughly six million loyal consumers were getting a raw deal from their provider.
The proposal that spurred the most backlash was a possible ban on automatic policy renewals – a tool used at scale in the motor and home sectors to make the process of renewing policies as low-touch as possible.
The regulator may still choose to bite down in this particular area to stop insurers from automatically raising their prices at renewal but several organisations, now including Aviva, have warned that the costs will be passed on to new customers in higher premiums.
There could also be less appetite among providers for their risk.
Insurance companies have in many cases been making a loss in their first year of covering a customer due to competition in the market, forcing them to offer entry deals to sell their policies.
A widely-used practice to counter these losses is to hike premiums at renewal to either break even or make a profit for the second year.
Dual pricing rules will have ‘significantly less impact’ on Aviva than other insurers
Holmes claimed Aviva is better prepared than most for any potential shock to the market caused by regulations on dual pricing, as it’s an area the company has been focused on for a number of years already with initiatives like Aviva Plus – a subscription model for general insurance cover.
“We’ve been very clear for a number of years that we’ve narrowed the gap between new and renewal pricing because we saw this as potentially being an issue, particularly around vulnerable customers,” he added.
“We spent a lot of time narrowing that across our portfolio for the last few years, so I feel very comfortable that the impact on Aviva will be significantly less than potentially it could be on other insurers.”
Aviva launched its subscription-based insurance service Aviva Plus last year, and Holmes referred to the results as “reasonably successful”, with the number of customers that bought into it reaching 250,000 at the end of last year.