The practice of setting low prices to attract new customers and then “price walking” customers to higher prices on subsequent renewals had become a key feature of home and to some extent motor insurance markets. Jonathan had seen this in his time as an executive in the industry and when he joined the FCA was keen to highlight the practice to his new colleagues and address the issues it raised. Those issues included the considerable barriers to competition created by the existence in incumbent firms of large profitable back books to subsidise prices in the “front book”. Not surprisingly the practices were also a cause of much discontent with customers and bodies that represented them. Firms too would often rather compete on innovation, efficiency and service but found it difficult to work out how to change what was a market-wide practice. The FCA agreed too that something needed to be done and launched a market study, evaluated options and put in place a ban on the practice.
