3 min read
On 28 May 2021, the FCA published its Policy Statement ‘General Insurance pricing practices remedies (Feedback to CP20/19 and final rules)’. It introduces multiple remedies to address the issues it found in its General insurance pricing practices market study final report.
The FCA highlighted several problems in the insurance market and has suggested several changes that businesses must implement by the end of 2021. These are substantial modifications and as the FCA states, are made according to the digital age. In this blog, we’ll give an overview of those changes and explore how technology can help accommodate them.
What are the changes?
The FCA expects insurance firms to make several changes such as:
- Stop providing differential pricing between new and existing customers. The FCA believes that older customers pay a loyalty fee as new customers get lower prices or discounts.
- Make it easier for customers to cancel auto-renewing policies. This extends the product governance rules to existing products and insurance providers will have to modify them along with the new ones.
- Stop using price optimisation techniques when setting prices.
- Prove compliance with this new regime by providing reports on pricing. It also requires annual attestation compiled by senior managers as part of the compliance.
Insurance providers have to make these modifications to their products and businesses by the end of 2021. Surely, that’s a lot to do in a very little time. The FCA believes that the suggested changes will make it easier for customers to get fair value. Moreover, it suggests that over the longer term, new introductions to insurtech will make it easier for the companies and customers to interact.
What are the implications?
More direct traffic expected
Over the last 25 years, the UK insurance industry has become increasingly reliant on price comparison tools, price analysis websites and aggregators. By using these vertical search engines, insurance customers can filter and compare products of different insurance firms. They can sort them according to their desired criteria including features, reviews, price, and more.
Such tools and websites created a very competitive environment that caused insurance firms to design special offers to attract new customers.
The new FCA ban on differential pricing between new and existing customers deters insurance firms from offering special discounts and offers to new customers. As a result, price comparison platforms and websites wouldn’t be as effective at a sale channel as they used to be. The competitive nature of these websites compelled insurance providers to create special offers but that wouldn’t be possible either.
Hence, insurers would become less dependent on price comparison websites. This implies that there would be more direct inbound traffic on the insurers’ websites. So it would be better for insurance firms to optimise and revamp their websites with a specific focus on quote and buy processes.
A crucial competitive advantage will be a pleasant and seamless customer experience across the whole insurance value chain, from quote to claims. Insurance companies can start by identifying current and flexible communication channels that ensure a good customer experience, such as insurance chatbots.
More automation needed
As more customers will be navigating insurers’ websites, it means there will be more queries. Avoiding call center surges will be a prominent issue for insurance providers. They will have to increase resilience and guaranteeing good customer service levels comes with automating the most defined customer-facing processes.
For example, the FCA is requiring firms to easily allow policyholders to cancel or auto-renew policies. These are well-defined tasks that can be codified and automated by using Conversational Process Automation (CPA).
Spixii has partnered with multiple companies in the past to offer off-the-shelf integrated solutions for this specific use case, namely: Spixii + Duck Creek Solutions and the Spixii + Blue Prism Solutions.
Digitisation and automation - the nirvana for compliance teams
At Spixii, we realised that most of our deliveries will go live once the compliance team approves the copy of every chatbot message, the results from user acceptance testing (UAT) and comprehensive scenarios testing. Using the conversational process automation approach, chatbots are 100% consistent as per the configurations determined and agreed with the insurance provider. This way, compliance can operate in total peace of mind when asked questions during internal and external audits.
The work of compliance teams will become more delicate and crucial as the FCA requires regular reports on pricing and self attestation by senior management. By using conversational process automation, compliance teams can function smoothly.
Conclusion
With FCA’s new suggestions, it is time to embrace more flexible and automated solutions to orchestrate online processes. Discover how Conversational Process Automation and chatbots can optimise insurance customer experience whilst enhancing business processes.
