FCA’s new pricing regime will shake up competitive landscape: Aviva CEO

Pending guidelines from the UK regulator The Financial Conduct Authority (FCA) will slash the discrepancy between rates on new and renewing policies in personal lines, shaking up the competitive landscape as the entry pricing calculus changes for new market entrants,  Aviva’s chief executive officer (CEO) Amanda Blanc (pictured) told analysts during her company’s third quarter investor call Thursday (Nov. 11).

“2022 is going to be an interesting year as we see those players without back book coming into the market and making statements,” Blanc said. “2022 could be interesting for the whole year.”

New FCA rules due at the beginning of the year constitute a “significant change” for industry pricing practices with a heavy reduction in renewal discounts pending.

“The consequence is that renewal prices will go up and new business prices will go down,” Blanc said. “There isn’t a lot of excess margin” that would allow the industry to only cut the new business rates while leaving renewal discounts untouched, she indicated. Those conditions seem most acute in automotive, she said.

Aviva will be ready with its new pricing model at the start of the year and is now testing new formulas, with an eye to protecting client groups from any unintended consequences in the shake up, she indicated.

Aviva is feeling confident in the pending competitive reshuffling, she argues, citing strong performance via price comparison websites and strong brand recognition.

Recent investments into digital platforms should pay off when setting and monitoring pricing under the FCA reforms, Blanc added. “The key thing we’ve learned is on pricing and pricing sophistication, that our analytics are really good … that investment definitely pays off” in prepping the pricing offer for 2022 under the new regime.

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