Personal Providers with books that are skewed to heavily discounted year one are facing a quandary about whether to change their strategy before the dual pricing review outcomes or wait until after. Either way Brendan McCafferty, CEO Brightside Group, believe this could be the biggest shift personal lines has seen for some time.
I’m sure I wasn’t the only one to wince after Saga wrote down the value of its insurance business by £310m at the beginning of April, and unveiled a new strategy, moving from securing new customers on price and recouping losses through renewals, to a business that “will offer a differentiated insurance product on the basis of unique and attractive features”.
While much of the ensuing commentary – especially in the broadsheets - focused on the behaviour of Saga’s ex-owners, us insurance anoraks were instead speculating whether Saga’s write down heralds a tectonic shift in personal lines, and other ‘sub net’ brokers and monoline insurers will follow suit. If, as seems possible, the dual pricing review restricts providers from hiking prices for renewal customers, books which are skewed to heavily discounted year one and early years’ policies – and mainly sold on aggregators – are looking at significant falls in profit.
Management teams therefore have a choice; wait until the review outcome forces their hands, or reposition their businesses now and join Saga, as well as the composite direct insurers Aviva and DLG, to offer customers fixed long-term premium deals. When to jump is an unenviable choice, but surely it’s a ‘when,’ not ‘if’ decision, because fixed term propositions, or at least “mad hatter” revenue profiles seem to be emerging as the response to regulatory and reputational pressure to deal with dual pricing.
Long term deals aren’t a natural fit for price comparison websites so marketing strategies may shift away from aggregators to refocus on direct-to-consumer.
In today’s data-driven digital world, successful marketing is all about relevant speed, efficiency, and building communities of loyal customers via personalised social media messaging. Many would say that, notwithstanding short-term pain from a move shopping around, that’s not a bad outcome for our industry and could be the catalyst to solving the trust problem that has bedevilled us for too long.