GETTING PERSONAL
A new scam that involves looking into anything and everything you put online could see you overpaying for insurance and more
As companies face increasing scrutiny for overcharging loyal customers as opposed to new ones, a fresh scam has reared its ugly head. It’s called “personalised pricing” and whether you are a new customer or not, you risk overpaying for almost anything from broadband contracts to home insurance, and sometimes even goods bought online.
Personalised pricing goes far beyond setting a rate based on age, postcode and what you want to purchase or cover.
In the past, home insurers would typically look at the chances of flood or burglary in your road, the property, past claims record, what you want covered and how much you will pay towards a claim.
Stores, meanwhile, would charge everyone the same whatever their background.
However, with personalised pricing, insurers can use whatever they find online to increase their prices.
Imagine you’ve mis-kicked a football so it breaks a window at home. If you have accidental damage cover, you might be able to claim.
Or you might say it’s hardly worth the bother as next year’s premium will go up or you have no such cover.
The last two mean you don’t tell the insurer but find someone to replace the glass. If you don’t claim but maybe post details or a photo, insurers could this pick up.
Likewise, car damage you repair yourself. Insurers then consider you to be a worse risk next year.
Some online retailers look at whether you are married, have children and the type of property you live in before setting a price.
Some banks are also looking at using personal data to work out how much interest you will get on savings – or how much you can afford in charges.
Citizens Advice says: “The explosion in the amount of available personal data gives companies the temptation to tailor prices and charge customers more based on their personal details and behaviour.”
The consumer watchdog says 85% of people would be uncomfortable with the idea of personalised prices in essential service markets.
Almost three out of four would not trust companies found to be using personal data for pricing purposes.
Now personal pricing for insurance is to be investigated by watchdog the Financial Conduct Authority. It will look at how this is used in car and home insurance policies after finding hidden discrimination between customers.
The study will assess the scale of the issue, whom it affects, possible solutions and how their findings impact on other insurances including pet and travel.