“Scorecards” that allow consumers to judge the overall value of insurance products will help them make better purchasing decisions, but price is likely to remain king for some time yet.
The UK Financial Conduct Authority (FCA) is piloting the publication of general insurance “scorecards” which will allow customers to avoid purchasing products of poor value. The scorecards are set to include claims frequencies, claims acceptance rates, and average claims payouts, potentially with the inclusion of an average premium metric. Launching in summer 2016, the pilot will last two years and will be tested on a number of products.
Providing claims information will be beneficial for customers when choosing a policy. Price is currently a key determinant of product selection within personal lines, which can cause customers to choose low-value or unsuitable products. Value measures could therefore influence customers to give greater thought to the value of what they purchase in the event that they need to make a claim. Publishing statistics will also help boost competition between firms, encouraging them to focus on improving the value and performance of their products.
Any legislative outcome of the pilot is still a long way off, but it is encouraging to see the FCA move towards greater transparency for customers. Standardization of these value measures across all general insurance products in the future will allow customers to better assess value. However, it is acknowledged that much more still needs to be done before customers’ price-driven behavior will change.
By Danielle Cripps, Insurance Analyst