In­sur­ance firms are over­charg­ing loyal cus­tomers by £1.2bn

Daily Express - - NEWS - By Sarah O’Grady So­cial Af­fairs Cor­re­spon­dent

MIL­LIONS of in­sur­ance pol­i­cy­hold­ers are over­pay­ing by £1.2bil­lion a year as com­pa­nies take ad­van­tage of their loy­alty.

As many as six mil­lion house­hold­ers and driv­ers are fork­ing out on a “loy­alty penalty”.

And insurers are us­ing a range of tac­tics to freeze long­stand­ing cus­tomers out of cheaper deals, warns the watch­dog Fi­nan­cial Con­duct Au­thor­ity.

Its com­pe­ti­tion chief Christo­pher Woolard said: “Many loyal cus­tomers are not get­ting a good deal.”

The FCA may now force firms to au­to­mat­i­cally move re­new­ing cus­tomers on to cheaper deals, or sim­ply ban loy­alty pre­mi­ums.

It could also stop firms from us­ing au­to­matic re­newals to dis­cour­age peo­ple from switch­ing to cheaper deals and force insurers to re­veal how their prices com­pare with ri­vals.

One in three cus­tomers who pays higher rates earns less than £30,000, it found.

And the pro­por­tion of older home in­sur­ance pol­icy hold­ers pay­ing more ex­pen­sive pre­mi­ums is higher than those on cheaper deals.

Switch­ers

This could be due to more el­derly peo­ple not be­ing able to use a com­puter to shop around.

A move two years ago to force home, mo­tor and pet insurers to in­form cus­tomers of price rises in re­newal let­ters led to £185mil­lion in sav­ings an­nu­ally as peo­ple switched to bet­ter deals.

Gil­lian Guy, chief ex­ec­u­tive of Cit­i­zens Ad­vice, said: “It’s great to see the FCA ac­knowl­edg­ing that the in­sur­ance mar­ket isn’t work­ing for con­sumers and pledg­ing to crack down on the loy­alty penalty.

“The FCA must now fol­low through on these bold ideas to stop loyal in­sur­ance cus­tomers be­ing pe­nalised.”

Last year, Cit­i­zens Ad­vice re­search found cus­tomers who stay loyal to their mobile, broad­band or in­sur­ance providers pay as much as £1,000 a year more than se­rial switch­ers – cost­ing them an ex­tra £4.1bil­lion.

Fi­nance ex­pert Sal­man Haqqi, of money.co.uk, said: “Insurers make mil­lions from cus­tomers who auto re­new with­out check­ing for a bet­ter deal first, and any bar­ri­ers to switch­ing are com­pletely un­fair and must be stamped out.

“Cus­tomers need to be dis­loyal to insurers. If your in­surer isn’t treat­ing you fairly, find an­other one.”

Gareth Shaw, of con­sumer cam­paign­ers Which?, wel­comed ac­tion on “sharp pric­ing prac­tices” and firms that rip off loyal cus­tomers.

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