Case Study: Marketing Ethics - Your Insurance Renewal Notice Could Be a Trap Consumers in the United Kingdom seem to be at the mercy of their own insurers. Hidden within the fine print of the renewal notices is the true cost of renewing the insurance, often as much as a 100 percent increase. This is despite the fact that there have been no claims on the insurance and perhaps the value of the insured asset has fallen since last year. Unwittingly, consumers have signed up for continuous payment to authorities. In effect, this means that consumers have agreed to continue to buy the insurance year over year, regardless of an increase in price, unless they contact the insurer and cancel it. If only cancelling insurance was that simple. If consumers fail to read the small print in their contracts carefully, they are hit by a cancellation fee. With higher percentages of consumers checking insurance quotes on price comparison websites, insurers still take the chance of inertia when the consumers receive their renewal notices. Insurers seem to rely on the fact that a certain percentage of consumers do not bother to read the documents, and if they do, they do not readily notice that the price is far higher than the previous year. The Financial Conduct Authority, which has responsibility for dealing with disputes arising out of financial services, receives around 500 complaints a year regarding insurance renewal. From April 2017, UK insurers are required to include text on their renewal communication to encourage consumers to shop around for the best deal. In cases when consumers have renewed with the same insurer four times, an additional message is required in the renewal communication to encourage shopping around. Insurers are also required to disclose last year’s premium alongside this year’s for clear comparison. Discuss the aspects of the competitive environment of the insurance industry that might encourage this type of practice. Discuss whether or not technology and access to price comparison websites can banish this type of fraudulent practice in the insurance industry.
Case Study: Marketing Ethics - Your Insurance Renewal Notice Could Be a Trap
Consumers in the United Kingdom seem to be at the mercy of their own insurers. Hidden within the fine print of the renewal notices is the true cost of renewing the insurance, often as much as a 100 percent increase. This is despite the fact that there have been no claims on the insurance and perhaps the value of the insured asset has fallen since last year. Unwittingly, consumers have signed up for continuous payment to authorities. In effect, this means that consumers have agreed to continue to buy the insurance year over year, regardless of an increase in price, unless they contact the insurer and cancel it. If only cancelling insurance was that simple. If consumers fail to read the small print in their contracts carefully, they are hit by a cancellation fee. With higher percentages of consumers checking insurance quotes on price comparison websites, insurers still take the chance of inertia when the consumers receive their renewal notices. Insurers seem to rely on the fact that a certain percentage of consumers do not bother to read the documents, and if they do, they do not readily notice that the price is far higher than the previous year.
The Financial Conduct Authority, which has responsibility for dealing with disputes arising out of financial services, receives around 500 complaints a year regarding insurance renewal. From April
2017, UK insurers are required to include text on their renewal communication to encourage consumers to shop around for the best deal. In cases when consumers have renewed with the same insurer four times, an additional message is required in the renewal communication to encourage shopping around. Insurers are also required to disclose last year’s premium alongside this year’s for clear comparison.
- Discuss the aspects of the competitive environment of the insurance industry that might encourage this type of practice.
- Discuss whether or not technology and access to price comparison websites can banish this type of fraudulent practice in the insurance industry.
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