A number of insurers and brokers have been re-evaluating their automatic policy renewals recently due to the amount of customer complaints rising dramatically. When it comes to insurance policies, most customers know when theirs is up for renewal and therefore begin looking for cheaper or more extensive policies during this time. However, there are those that claim that insurers are not always clear enough or do not inform their customers properly about their auto-renewals.
In certain circumstances, customers who are not aware of their auto-renewal policies can accidently end up purchasing a new policy and then find themselves paying for both. This could result in overdrawn bank accounts meaning a potential charge from the bank. This is why a number of insurers include information concerning policy auto-renewals within their Product Disclosure Statements which are usually sent to customers once they have purchased their initial policies.
In order to prevent such situations from occurring and to reduce the number of complaints made to insurers and brokers, a new industry code of conduct is being bought in to protect any “vulnerable” customers such as the recently bereaved and the elderly. This is particularly important due to the fact that Insurance Premium Tax (IPT) and therefore insurance premiums are rising, making the average cost of an auto renewal around £200 a year.
The new code will be put into place for the “vulnerable” which includes the elderly, bereaved and also those with low literacy and mental health issues. It is believed that people who fall into these categories are more likely to pay for an auto-renewal and it is likely that they wont realize that they are paying for it. Regardless of the auto-renewal, the average car insurance price has increased by £13 since quarter 3 of 2015. This means the vulnerable could unintentionally be paying a lot more than they need to be.
The Association of British Insurers (ABI) has stated that in order to protect their customers, brokers need to speak to their underwriters and ensure they are clear with any policy changes that could affect their customers’ fees for next year’s payments compared to the previous year. The ABI states that brokers should also ask for consent when it comes to renewing policies which could hopefully end up saving motorists over £100 a year.
They added: “People with low literacy or numeracy skills, mental health issues, old age or a recent bereavement” will pay extra money needlessly, without realizing.
Here at Victor Millwell we often discuss how insurance brokers can navigate complex regulations to ensure the success of their businesses as well as provide excellent customer service. This change is just another example of where the ABI and customers will be able to determine the good brokers from the bad, as those that already communicate well with their customers won’t have to change much in order to adhere to the new regulations.
In fact, these new regulations could increase the lifetime value of customers if brokers take this opportunity to build up trust with them. Conversely, brokers that aren’t completely transparent with customers could end up damaging their company’s trust and respect.
The new “vulnerable consumers’ code” is voluntary but will apply to policies sold by brokers belonging to the ABI or British Insurance Brokers Association (BIBA). The Chief Executive of BIBA, Steve White, said: “A published code will raise awareness. We are still working through the practicalities of how the code will operate, but we expect it will boost trust in the insurance sector.”
Brokers should also be sure that they are completely transparent about any premium increases when it comes to renewals, as in some cases price increases are not provided to customers either clearly or at all. If customers notice it will, once again, completely damage the trust they have for the broker. Most other companies (i.e. gas and electricity suppliers) are obliged to show broken down information on any price increases however motorhome insurers and brokers are currently not – something that will likely change in the future.
Photo by Pixabay