Following the FCA’s decision to extend changes to pricing and reporting requirements until the end of 2021, new research from reinsurer Swiss Re raises concerns that the timeframe “is still not sufficient”.
In a survey of top UK insurers, results showed that almost two thirds (60%) believe that a minimum of nine months is needed for successful implementation.
It also found that firms expect customer switching to take 1-3 years to normalise post-implementation and half (50%) of respondents foresee a “significant expansion” of brands as a result of the new regulations.
Of the key areas concerning insurers, Pricing is seen as the element requiring most effort ahead of implementation, with more than half (57%) citing this view. This was followed by Governance (26%) and Renewals (13%).
It added that on the topic of Governance, while there is “clear concern”, most respondents appear confident that their management information (MI) systems are “already sufficient”, with almost two thirds (62%) believing no extra work will be required ahead of implementation. One in three (33%) said that only a few add-ons will need to be built to draw out the relevant data.
Jason Paschalides, senior P&C Analytics Solutions manager at Swiss Re, said: “Since the FCA proposed its plan to fix renewal price walking back in September, the UK market has been awash with speculation over exactly how and when the new rules will be implemented – and whether insurers will have time to put robust infrastructure in place to be fully compliant with the new rules.
“While the extended timeframe goes some way to alleviating the pressure, our study indicates that the implementation period could still be too short to be achievable for many players – particularly on the pricing side.”
He added: “Assuming lower pricing differentials reduce switching in the market, it’s going to become much harder for insurers to grow their existing portfolios. In response, it’s likely we’ll see strong household names moving to differentiate brands within their business in order to allow for different pricing in different segments of the market.
“We expect a common route will be firms choosing to adopt a PCW focused brand, as well as a direct brand.”