Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.
Sign up for our Insurance UK newsletter
You must correct or enter the following before you can sign up:
Thank You!
Law360, London (March 8, 2021, 10:55 AM GMT ) Direct Line Insurance Group PLC said on Monday that it has started overhauling its pricing practices before regulatory changes in the market planned this year by the Financial Conduct Authority.
The Financial Conduct Authority will introduce a sweeping ban on what it calls price walking in the fall, a practice in which loss-leading rates for new insurance customers are subsidized by annual price hikes for long-term policyholders. The regulator has expressed concern that insurers are raising prices every year at renewal time.
Six million people are being overcharged £1.2 billion ($1.7 billion) a year by their insurer because of the practice, the watchdog believes.
Direct Line said its early adjustment is in line with its "proactive" policy in recent years to reduce the difference between what it charges long-term policyholders and how much it charges to attract new customers. The company's chief executive Penny James said the company was supportive of the work of the FCA.
"This is an area where we have already been proactive for several years by implementing a range of measures to reduce the differential in pricing between our new business and renewal customers," she said in a statement accompanying the insurer's annual results.
There is uncertainty over how and when the FCA will apply its rules as well as the possibility of "short-term volatility as the market rebalances," James said.
The FCA plans to publish its final report into dual pricing — also described as "dual pricing" or a "loyalty penalty" — in the second quarter of the year. The changes will be implemented four months later.
Speaking to insurers at a conference last month, the FCA's executive director of consumers and competition, Sheldon Mills, said the watchdog had heard concerns about the "ambitious" timetable and would publish a response soon.
James said on Monday that — alongside the FCA's pricing reforms — there were "many moving parts" that would affect the company in the coming year. They include price fluctuations arising from personal injury reforms expected to be introduced in May and the way in which the COVID-19 outbreak and its associated lockdowns had changed driving patterns, with motorists racking up fewer miles.
Direct Line, one of the largest motor insurers in Britain, said that COVID-19 had produced a "modest net benefit" for the company because there were fewer motor accidents in 2020 as a result of a reduction in numbers of cars on the road.
The company reported a pre-tax profit of £451.4 million in the full year to the end of December, down 11% from the £509.7 million in 2019.
--Editing by Ed Harris.
For a reprint of this article, please contact reprints@law360.com.
