General Insurance Pricing Practices (GIPP) and what it means for LEI providers

The first stage of the FCA's GIPP comes into force on 1st October. In this insight piece we look at what GIPP is attempting to achieve, how it plans to do this, and its impact of LEI providers.

What is GIPP?

Back in May 2021, the Financial Conduct Authority (FCA) produced what they have designated PS21/5: General insurance pricing practices market study (which you can read in full here).This documents was the culmination of several years’ work involving surveys, research and market consultations. In short, the GIPP is designed to provide greater protection to consumers and stop what has been called the "loyalty penalty".

GIPP currently applies only to home and motor insurance policies.

How does GIPP aim to do this?

Amongst the requirements GIPP introduces are:

• Firms cannot offer renewal prices greater than the equivalent new business price.

• Firms must have appropriate processes in place to determine and ensure products offer fair value to the customer.

• Cancellation of auto-renewals must be easy and accessible

These aims are all backed and monitored by the introduction of additional reporting requirements on firms.

What does this mean for LEI providers?

LEI is more unique than most lines of business in that it is most commonly sold as an add-on feature (whether optional or compulsory) and so the rules are a little different than core policy providers.

The FCA has stated that it is the responsibility of the firm setting the final price the customer pays to fulfil the new reporting requirements. Depending on the distribution channel, this could mean either insurers or agents. For add-on policies sold via a delegated authority scheme, as is common with LEI, this will almost always mean it is the broker or agents' responsibility to report the required information.

Generally, firms will only have to provide the following:

• total gross premium of new and renewing add-on business

• total unit of new and renewing add-on business

• This must be broker down by 'tenure', with T0 being the first year of the policy, through to T10+.

Final thoughts

Although well intentioned, GIPP has attracted its critics for the short amount of time allowed to implement the first stage of changes, which may be significant especially on smaller outfits when also considered alongside the FCA's new 'value measures'. Time will tell if GIPP is successful in achieving its aim and if it will see expansion beyond the home and motor markets.