The Treasury Committee’s session heard from Which, Citizens Advice, Allianz, the ABI and the FCA. Discussions centred around the significant increases in motor premiums over the last few years. This meant that issues like claims costs, premium finance, complaints and vulnerability were brought together and discussed, at a fairly high level.
So what signals came out of this session? The lack of data to explain the surge in premiums was the big signal, by far. Sector profitability levels were touched on, as well as supply chain and retail vehicle costs, but nothing in the way of how each of these trends was actually influencing (in pound or percentage terms) recent premium increases.
To be honest, it sounded rather like the same old high level narratives being brought out again and discussed in broad terms. A rehash then ; nothing revealed ; no analysis. Nothing to steer decisions with ; no insight available.
Should we expect more from a session of the Treasury Committee? After all, it’s never been the place for deep analysis. At the same time though, it doesn’t usually tolerate the same old narratives being rehashed in front of it. The Committee wants to be informed about why things are happening and what is being done about it. They would have come out of yesterday’s session with some of the former and little of the latter.
No Data feels like No Answer
So what will be their response? It is very likely that they will criticise both the sector and the regulator for not having the data to hand that gets to the heart of what is driving (and to what extent) these price increases.
The sector will certainly be collecting most if not all of the relevant data. There is just not enough pressure being put on them to share it. Given the often remarked mandatory nature of motor insurance (by law) and home insurance (by mortgage contract), that strategy of opaqueness will end up being judged harshly.
The regulator will be drawn into that harsh judgement, despite protesting that they are not a price regulator and do not do ‘social policy’. Their weakness is that they cannot talk about fair value by product and insurer without also paying some attention to the macro trends that are driving the headline figures.
This is not price regulation; it is about monitoring decisions and behaviours that are driving consumer outcomes, particularly for low income families and vulnerable people. And to be honest, the FCA has been regulating pricing, after it banned price walking. It’s time someone looked carefully at how the regulator shapes its role in relation to pricing. And this needs to be done independently, for the corporate culture inside the regulator is a big influence on this.
Forced Transparency
I wrote earlier this year about the prospect of the sector entering a period of forced transparency (more here). One aspect of that prospect was the possibility of a consumer group (such as Citizens Advice) being appointed as a statutory consumer advocate for the sector. Yesterday’s session of the Treasury Committee added to that prospect.
One part of me thinks the sector and the regulator fell into a trap in how they approached this session. In the first of the session’s three panels, the consumer groups focussed repeatedly on a lack of real transparency as to what is actually driving these price moves. In the second and third panels, the sector and the regulator offered up little to dissuade the Committee from that interpretation.
During my time in both personal and commercial markets, I learned the power that good data and analysis can exert over the shape and direction of negotiations. It really can define outcomes. At the moment, it appears to me that the sector has forgotten those lessons. Influence comes not from what data you have, but how you bring it into play. The sector’s apparent strategy of keeping things close to their chest in order to contain pricing controversies is not working. It looks more like it will back fire on them. In the end, that’s not good for anyone.
