The £200 cost of insurance loyalty
Six million pay price for sticking with their provider
LOYALTY is costing six million insurance policy holders £200 every year.
home and car insurers are routinely pushing up the premiums of customers unlikely to switch to a new provider, the finance watchdog said.
But these policy holders could save £1.2billion a year if they shopped around, according to the Financial Conduct Authority (FCA).
The regulator found insurance giants were saving their best deals to entice new customers, while charging old clients more the longer they stayed.
It said one in three insured homeowners were paying 50 per cent more than the average premium, while one in five were paying double.
The regulator launched an investigation into the £18billion insurance market last November amid concerns customers were being ripped-off.
The FCA yesterday said some firms were engaged in ‘harmful’ practice. Christopher Woolard, executive director of strategy and competition, said: ‘This market is not working well for all consumers.’
The regulator has now proposed restrictions on price rises for those renewing their policies, as well as preventing firms from discouraging clients from switching. Auto-renewals could be banned or replaced by an opt-in only system.
Providers may also have to improve their transparency and may be told to reveal how much different customers are paying. Money Mail has long campaigned for an end to the socalled ‘loyalty penalty’.
households that stick with the same banks or providers of mortgages, mobile networks, broadband and home insura
‘Shop around regularly’
ance are paying more than £4 billion a year, according to Citizens Advice. Gareth Shaw, of Which?, said last night: ‘It is right that the regulator is proposing solutions to stop these sharp pricing practices.
‘Our research has found existing insurance customers can be left paying hundreds of pounds more than new customers as a result of complex and opaque pricing systems. The regulator must now ensure these proposals are brought in swiftly, and that it is ready to take strong action against firms that continue to rip off consumers simply for staying with their providers.’
Salman haqqi, from personal finance site money.co.uk, said: ‘The FCA’s findings are unfortunately not surprising to anyone who has seen their premiums go up every year.
‘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.
‘We welcome the news that the FCA is reviewing the autorenewal process to stop those firms that abuse their customers’ trust this way.’
Gillian Guy, chief executive of Citizens Advice, said: ‘At the moment these are just proposals. The FCA must now follow through on these bold ideas to stop loyal insurance customers being penalised.’ huw evans, of the Association of British Insurers, said: ‘Millions of insurance customers get extremely good deals by shopping around regularly, but we agree that the household and motor insurance markets could work better for consumers who do not shop around at renewal.’
The FCA will consult on its findings and a final report will be published early next year.