Crackdown on rip-off insurers

POLITICIANS from all parties last night demanded insurance firms be forced to justify huge annual price hikes for long-standing customers or face heavy fines.

They called on regulators to enforce a new code of conduct to clamp down on shady practices after the Mail revealed greedy firms were charging loyal customers up to three times the rate offered to new ones.

Ros Altmann, a Tory peer, said: ‘The regulators need to ask insurers to justify their rises and if they cannot clearly explain large increases, they should face a penalty.’

INSURERS must be forced to justify huge annual price increases for loyal customers or face heavy fines, leading politicians demanded last night.

They called for action after the Mail revealed that greedy firms were charging long-standing customers up to three times the rate offered to new customers.

Candidates from all parties said regulators should enforce a new code of conduct to clamp down on shady practices.

It came as industry data revealed that four in five people are being hit by the loyalty ripoff on home and car insurance.

According to Esure, 78 per cent of its customers choose to renew their policy each year. This rises to 79 per cent of customers with RSA and 80 per cent with Direct Line. This suggests millions of homeowners and motorS ists are missing out on savings by sticking with their insurer rather than shopping around.

Pensioners are the worst-hit because they are less likely to look for deals online.

The calls for insurers to be forced to justify to customers why they have hiked their premium come after a Money Mail investigation found long-standing customers are being over-charged by up to £1,000, while insurers offer new customers loss-making introductory deals. In the worst cases, insurers are charging people six times the cheapest price on the market.

George Kerevan, a Scottish National Party candidate who was a member of the Treasury select committee, called for an immediate investigation into pricing techniques. He believes the Competitions and Markets Authority (CMA) should look for evidence of rip-off deals over fears insurers could be colluding on price rises.

The Financial Conduct Authority watchdog should then draw up a new set of guidelines forcing insurers to explain why they are putting customers’ prices up, he said. Any which failed to justify their behaviour could be heavily fined as a result.

Mr Kerevan, a former economist, said: ‘Companies which offer a pricing system that harms customers should have financial penalties imposed upon them.’

Since April, insurers have been forced by the FCA to declare how much they are raising their price by on renewal letters, but campaigners say this is not enough.

Ros Altmann, a Tory peer and former pensions minister, said: ‘The regulators need to ask insurers to justify their rises and, if they cannot clearly explain large increases – if the customer has not changed their car or house, or made a claim, or it cannot be explained away by tax rises – they should face a penalty.’

Labour candidate Wes Streeting said: ‘It is pretty clear from the Mail’s investigation that insurers are playing the same scandalous games banks were and ripping off their longeststanding customers. They offer shiny new deals at a loss to new customers, which are effectively subsidised by those who remain loyal to them. Insurers must be forced to be responsible towards those who stick with them.’

Insurers say stealth taxes, rising repair bills and bogus whiplash claims have driven up their costs, but politicians say this does not explain why loyal customers are hit with hikes of up to 100 per cent while new customers are offered cut-price deals.

Liberal Democrat candidate Greg Mulholland said: ‘Loyal customers are being hit by insurers who are taking them for granted. The Financial Conduct Authority urgently needs to investigate why so many customers are being ripped off.’

James Daley, of campaign group Fairer Finance, said: ‘We need to force insurers to not just write a letter to people before renewal, but text them and email them, so they’ve genuinely done everything possible to warn customers they’re about to move to a higher price. When it comes to more vulnerable customers who maybe don’t have the internet, they might need to ring them.’

James Bridge, of the Association of British Insurers, warned against further intervention by regulators, saying: ‘It is important to take into account the interests of all consumers, including those who shop around for the best deal. Hasty interventions into the market could serve to be counterproductive for consumers.’