The Financial Services Consumer Panel has recommended automatic upgrades as a potential solution to the so-called loyalty penalty, suggesting the principle could be applied to home insurance, pensions and income protection policies. Responding to their report, Hugh Savill, Director of Regulation at the Association of British Insurers, said:
“Pricing practices which can unintentionally penalise loyal customers deserve a well-considered solution. The proposal put forward by the FSCP to automatically move customers onto other products overlooks the practicalities of underwriting and product choice. It carries risks, that customers could be moved onto policies that don’t take their specific circumstances into account or provide them with the levels of cover they need.
“The ABI and its members are committed to working with the FCA and others on finding the right way forwards on the so-called loyalty penalty. Of all the sectors examined, insurers have already done the most to recognise the problem and take steps to address it.”