One of the worst consumer cons of modern times
WHO should be more upset with Saga – investors who saw the value of their shares plummet by a third yesterday, or long-standing customers who have just discovered their insurer knowingly fleeced them for years?
The personal finance giant’s announcement that it will launch a three-year fixed price deal for car and home insurance customers should have been cheered from the rooftops.
Instead chief executive Lance Batchelor may wish he had never opened his mouth, after bumbling into an admission on Radio 4’s Today that the most loyal customers had been getting a terrible deal for years.
‘We’ve made the decision to fundamentally change the way we sell insurance,’ he said, before adding: ‘It’s a painful day for shareholders but a good day for consumers.’
For years, Money Mail has exposed the so- called loyalty rip- off, whereby insurers lure customers in with cheap deals only to then quietly hike their premiums at renewal time in the hope they will not notice.
This strategy can be beaten by those of us who have the time to shop around each year as we can usually switch to a better deal.
But anyone who lacks the internet knowhow or is too busy to do the leg-work will end up paying over the odds for everything from car and home insurance to breakdown cover. Indeed, it is fair to say that milking
your loyal customer base is one of the biggest rip-offs perpetrated on consumers.
The Competition and Markets Authority believes that if broadband, mobile phone and energy firms are also included, the loyalty penalty collectively costs us more than £4billion a year.
By changing its policy, Saga – for years a trusted British brand – has tacitly admitted that the game might well be up.
In fact, its famously loyal customers have proved to be such a cash cow that Saga’s decision to offer them a fairer deal meant Mr Batchelor had to issue a profit warning – and sent the share price tumbling.
Yesterday some City observers drew comparisons with the infamous day jeweller Gerald Ratner told the world he sold ‘total crap’. His reputation never recovered and if I was a Saga customer, I would be furious.
What is most disappointing is that Saga is supposed to be looking after the elderly, who are most vulnerable to being ripped off and less able to find better deals online.
And we can’t even really credit Saga with finally coming clean of its own accord because the decision follows the Financial Conduct Authority last year unveiling a probe into insurance pricing practices.
The crackdown means announcements by other firms are likely to start coming thick and fast. Aviva has already announced a pay-as-you-go style insurance that guarantees policyholders will not pay more at renewal than new customers.
However, do not assume these new deals will always be the best option. Customers are still likely to find a cheaper policy by shopping around each year. Yet for anyone who does not want the hassle of switching so regularly, yesterday heralds a small step forward in ensuring a fairer deal for all.