"Advisers are set to benefit from the changes by the creation of a more competitive and fairer market for their operations."
In the very same week that the FCA wrote to price comparison websites outlining its supervision strategy, the Competition and Markets Authority hit ComparetheMarket with a £17.9m fine for keeping home insurance costs artificially high.
In its supervision strategy letter to CEOs, the FCA outlined the key risks of harm that price comparison websites posed to consumers and relevant markets – from ineffective governance arrangements and poor culture to consumers being either sold products that do not meet their demands and needs or unable to access financial services altogether.
The letter followed in the footsteps of the FCA’s long-awaited market study into general insurance (GI) pricing practices published in September. I believe that the proposed changes stand to benefit both advisers and customers by creating a level playing field where the focus is on value rather than price.
The advent of aggregators has led to a race to the bottom with insurers lowering pricing in order to compete and attract new business. This is an industry-wide problem that must be tackled through collective action.
Paymentshield has always advocated value over price, and we believe that the FCA’s pricing report and supervision strategy will lead to fairer, more accurate pricing that reflects the risk profile of the customer. By continuing to work closely with advisers, we can ensure that customers receive personalised, tailored advice and the right product for them.
Advisers are set to benefit from the changes by the creation of a more competitive and fairer market for their operations. The proposed changes aim to tackle “price walking” and ensure that every organisation in the insurance distribution chain thinks about pricing across the lifetime of a policy.
As a trusted consultant to customers, advisers are in the strongest position to help guide customers on choosing the right policy that genuinely suits their needs rather than simply plucking for the cheapest.
However, advisers will only maximise the full benefits of this market shift if they drive home the value message to customers. In order to maximise those opportunities, advisers need to be making full use of the innovations in technology and data. By strategically using the goldmine of customer information they sit on, advisers can make data-led decisions that create more prospects and deliver greater value to customers on a larger scale.
Ultimately, the more we know about our customers, the better service we are able to offer them and it is this personal touch that sets advisers apart from aggregator sites. Advisers are also set to benefit from the removal of cancellation barriers, which will make it easier to attract remortgage and product transfer customers with an incumbent insurer.
It is important to remember that the market study forms part of an industry wide consultation that runs until January 2021. Full implementation is expected with the policy statement in Q2 2021.
I believe that the guidance outlined in the pricing practices study and price comparison website supervision strategy will create a positive step-change for this industry. It promises to create a fairer market for both customers and advisers, where competition has to be based on delivering a valuable product that genuinely meets customer needs.
The ball is back in the court for advisers to articulate the benefits of using a professionally qualified financial adviser and to educate customers on the pitfalls and practices of price comparison websites.