If General Insurance Pricing Practices (GIPP) doesn’t ring a bell, it probably means you’re new to the car insurance market. There have been very few regulatory changes in the last decade or two with this level of impact on car insurance pricing... and even car insurers’ business models.  

In a nutshell, the car insurance business model for a very long time had been focused on hooking customers in at a low price at New Business –  and then increasing premiums in the following years at Renewal – betting that customers are too busy with their lives to shop around. 

This business model became even more prominent with the emergence of car insurance aggregators such as Confused.com, Compare the Market, GoCompare and Money Supermarket. The comparison websites heated up the price war, driving many insurers to further lower the price at New Business and make up for it at Renewal.  

You don’t need to be a car insurance guru to see that this business model doesn’t work for the customer. Fortunately, the FCA has stepped in to battle price hikes at Renewal. According to the new FCA guidelines, insurers have to offer their renewing customers a renewal price that cannot be higher than the equivalent new business premium for the same customer risk. The FCA also collect regulatory returns from those selling motor and home insurance policies to ensure that customers aren’t paying a loyalty bonus for staying with the same firm for a number of years.  

How does GIPP impact car insurance customer propositions? 

So far, the impact of GIPP has been most visible in Renewal pricing, and rightly so. After all, it’s not an overnight job to change the whole business’s pricing structure. However, the impact of GIPP goes well beyond Renewal pricing.  

The core of GIPP is our good old TCF – Treating Customer Fairly – with a focus on Renewals. The FCA had already raised concerns around insurance fees (e.g. admin fees and cancellation fees), and now GIPP is taking those guidelines one step further by bringing Renewal pricing in scope. Furthermore, the Renewal remedy of GIPP makes it easier for customers to opt out of auto-renewals on their general insurance policies, ensuring they remain in full control.  

It’s easy to get bogged down in the details, but the spirit of these regulations is relatively simple: the customer should be in control. If they don’t need or want your product, they should be able to switch in an easy and fair process. 

At Driverly, we take this spirit and implement it to the extreme. With Driverly, the customers are not trapped in an annual policy... they subscribe to our flexible monthly policy, and if not happy with our price or service, they can leave with zero cancellation fee. Moreover, they won’t have to spend half an hour over the phone to battle a Renewals call-centre agent; they can simply go to their Driverly app and cancel their policies with a few taps on their mobile phones. 

And finally, there have been long-lasting debates about the way car insurers reward their customers. Historically, customers are rewarded for joining a car insurer and then penalised for their loyalty. This practice is of course upside down, hence why GIPP came in force. Moreover, this practice is silent on the customer driving behaviour. At Driverly, we have a very different approach to rewarding our customers. Our acorn rewards’ scheme is built on the customer’s driving behaviour and then adds a loyalty element on top of it. If you consistently drive safely with a driving score over 90 out of 100, you can reduce your monthly premium by up to 25%-35% within 6 months, according to our pricing simulations. This simulation assumes other factors remain unchanged.

To summarise, GIPP is a game-changing regulation. It not only affects the way renewal pricing works, but can also change the car insurers’ view on their customer proposition and customer engagement, focused on fairly rewarding both good and loyal drivers.