Throughout the 2010s, the most widespread complaint from retail consumers was around price walking – the practice of offering renewal rates that were higher than they would have been for new customers with the same risk profile. The issue became front page news and affected the opinions of many SMEs about the insurance they bought, even though there was less evidence of price walking being such a significant issue in this sector.

In 2021, the Financial Conduct Authority attempted to resolve this reputational issue by announcing rules to ensure that people who were renewing their home and motor insurance were treated in the same way as new customers.

Four years later, we are still seeing headlines like the one Which?, published in July, that read: ‘Taken for a ride?: Sizeable reductions to car insurance renewal quotes after haggling cast doubt on insurers offering fair value’. And yet the FCA’s analysis of insurance pricing, published in August, said that its findings provided “encouraging evidence of reduced price differentials across both the home and motor markets”.

So what has been happening over the last four years to create such different reports?
If we look at how the market has developed from the consumer’s point of view, a picture starts to emerge. Up to 2021, the practice of price walking was widespread. The subsequent rise in consumers’ premiums was not because of price walking, but because of huge increases in the costs of claims – prices that have more recently stabilised. To sum up, consumers became used to seeing higher prices because of price walking, and assumed the practice was continuing when prices went up due to claims inflation.

The CII’s Trust Index charts consumer perceptions of how insurers are responding to their loyalty – in terms of the gap between their expectations about the importance of the issue and their rating of their insurer’s performance. It shows that after the introduction of the FCA’s rules, the expectation gap actually worsened – but that as prices have stabilised, it has started to narrow.

This improvement could be the beginning of the solution – but only if insurers demonstrate to consumers what they have shown to the FCA – that price walking is a thing of the past. For example, insurers could offer a reward for loyalty to all their customers – not just those who call in and ask for a loyalty reward. Similarly, insurers are starting to give explicit customer guarantees about pricing: my own home insurer added a message to my renewal quote this summer, writing: “We’ll make sure your renewal price is the same or cheaper than you’d get as a new customer for a like-for-like policy.”

Insurers have a great opportunity to mend the damage to trust that was caused by price walking. The first step is making pricing policies crystal clear to customers.

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