HOW YOU CAN FIGHT THE INSURANCE RENEWAL RIP-OFF
As the first customers win refunds for unfair price hikes . . .
HOMEOWNERS and motorists can claim compensation from their insurer if they are hit with unfair price hikes, Money Mail can reveal.
We have discovered that customers are winning refunds if they complain about rip-off quotes when renewing their cover.
Typically, customers who complain their premiums have risen for no good reason are fobbed off by insurers who claim it is up to them what they charge. Sometimes they give a flimsy excuse, such as tax increases. Other firms don’t even try to justify hikes.
But now it has emerged that if customers take these cases to the Financial Ombudsman they can get compensation.
One in four who go to the official disputes service are being awarded a partial refund. In some cases, insurers have been told to hand back more than £1,000.
The Ombudsman will only sanction a refund if it finds evidence your insurer has treated you unfairly. This includes where firms are unable to provide a clear reason for a price hike. They must also show they have not penalised you more severely than other customers in similar situations.
If you’re a long-term customer, you could get a refund if the firm failed to do enough to inform you of newer and cheaper policies.
The payouts are a big breakthrough for Money Mail. We have repeatedly exposed in recent years how insurance firms overcharge millions of loyal customers by reserving their best deals for new ones.
The City watchdog is now investigating the rip-off. And in another boost, the insurance industry yesterday published new guidelines that force firms to treat loyal customers more fairly. These include ensuring the policyholders are not excessively penalised and making it clear that discounts offered to new customers last just one year.
Today we call on anyone who thinks they’ve been overcharged for insurance to take their complaint to the Financial Ombudsman.
You can use our template letter, right, to demand a fair deal — and compensation.
Consumer expert Martyn James says: ‘For too long, many insurers have acted with impunity by hiking premiums each year, often without justification, and penalising loyal customers. The decision by the Ombudsman to address this is fantastic news and a great victory for Money Mail.’
About 200 people a month contact the Ombudsman about insurance prices. Most have seen huge hikes — despite never making a claim — and their circumstances remaining the same as when they bought the policy.
Others are finding they are paying hundreds of pounds more than new customers for the same policy. Many are elderly or vulnerable. Until now, the only way to avoid this has been to shop around, which puts people who are uncomfortable with computers at a disadvantage.
The Ombudsman once regarded insurance prices as a commercial decision for firms. But as complaints poured in, it began to ask insurers how they set premiums.
In a letter to a Money Mail reader, the disputes body says: ‘We’ve now started looking at some individual complaints against certain businesses. We hope to be able to expand this work out to other complaints over coming months.’
A spokeswoman for the Ombudsman says in most cases insurers are fair. And since 2017 insurers have had to print the premium customers paid the previous year on renewal notices. If people have renewed at least four times, letters must state they are unlikely to be getting the best deal without shopping around. If the Ombudsman decides the firm has unfairly hiked prices, it can tell the insurer to refund some of the premiums plus interest. Compensation for distress can also be awarded. In one case, a customer in her 40s, with the same insurer for 15 years, found that her provider was offering an identical home policy online for about £1,000 less. The Ombudsman said the insurer should have told her this and ordered the firm to refund the difference between what she had paid and would have been charged if offered the cheaper policy five years earlier, plus 8pc a year interest. In another case, the nephew of a man in his 80s with dementia found his uncle was paying £1,400 for home insurance for a two-bed house after staying with the same provider for 15 years. It charged £300 online. The Ombudsman ruled that the uncle’s renewal letters had said that unless his circumstances had changed he didn’t need to act — which was misleading. The firm should also have recognised the uncle may have needed help to make an informed choice from the fifth year onwards — when the price began to rise by 15 pc a year. It ordered the insurer to refund the difference between the price paid after five years and renewal quote, plus interest and £150 compensation for distress. Chief ombudsman Caroline Wayman says: ‘In a small, but significant, number of cases, we’ve seen that people are paying the price for loyalty in a way that’s simply not fair.’ An Association of British Insurers spokesman says: ‘We are taking action on excessive differences between new customer premiums and renewals and want to see a marked improvement for longstanding customers.’