High switching fees lock-in insurance customers

The Swedish Competition Authority has audited the effects of switching fees and proposes a number of measures which can both promote the customers’ opportunity to switch their insurances and at the same time strengthen the competition in the market.

“High fees which result in lock-in of the consumers inhibit customer mobility. They can also lead to fewer new establishments in the market,” says the Swedish Competition Authority’s Director General Dan Sjöblom.

Over recent years several life insurance companies have increased the fees for switching a pension insurance to a competing company. The potential lock-in effects of this resulted in the Swedish Competition Authority’s decision to study the market more closely.

An overview of the market is presented in the report “Switching fees in the life insurance market – potential lock-in effects among pension insurances.”  Identified problems are illustrated and a number of proposed measures are presented. Among other things, the Swedish Competition Authority proposes the following:

• The opportunity to impose high switching fees a long time after taking out pension insurance should be restricted.
• Requirements for clearer information to customers before important insurance terms and conditions are changed. Information on the company’s website is not sufficient.
• Legal entitlement to switch all individual and private pension insurances – irrespective of when they were taken out.

“Different types of pension insurance are essential for support after retirement. It is very important that insurance holders can influence how the saved money is administered, and by which player. Therefore, increasing the opportunity to switch insurance is critical,” says Dan Sjöblom.

Read the report, 2016:12 (in Swedish)