Shame on you for failing to reward loyalty
IT IS time for the Association of British Insurers, the flag waver for insurance companies bad and good, to undergo a rebrand. Rather than pay expensive consultants to do the makeover, I have decided to offer my services for free (gratis). From now on, it should be called the Association of British Inconsiderates, which means it can still use its new jazzed-up ABI logo (a logo which no doubt did not come cheap, like much of the insurance its members peddle).
I am sure you will agree, the Association of British Inconsiderates has a nice, honest ring to it and better reflects how the organisation’s members (nasty insurers) go about their business. That is, being inconsiderate to those customers who have remained loyal to them through thick and thin.
Harsh? No way, although no doubt the association and its members will think otherwise (I can feel a stroppy letter or two coming my way already).
Let me give you two examples of how this inconsiderate behaviour manifests itself and then judge for yourself whether I am being fair or not. Even better, tell me what you think (email address is below). The first ‘inconsideration’ is to loyal motorists and homeowners who religiously renew their insurance with the same company every year. Customers who, you would have thought, should get special loving treatment because of their unbending devotion.
But no, they get exploited with premiums rising every year, irrespective of the fact that they have never made a claim. As a consequence, their cover ends up far more expensive than if they were someone buying the same cover from their insurer for the first time. New over old. Loyalty costs, it does not pay.
Outrageous? Absolutely. Scandalous? Without a doubt.
Earlier this year, research by Consumer Intelligence showed that those who moved their home insurer after just one year saved £37 as a result. Switching after five years saved them £78 while those who moved after nine or more years saved around £127 – paying £124 for new cover against the £250 they would pay if remaining loyal. Similar savings from switching motor cover rather than staying loyal were also identified.
The Financial Conduct Authority now requires insurers to show on renewal letters for health, home and motor cover both the previous year’s premium and the new one. Such information, it hopes, will encourage more people to switch or renegotiate the price of their existing cover. Yet it should not be the responsibility of loyal customers to get on the phone to their insurer and negotiate a discount. It should be offered as a matter of course. ‘Thank you for being loyal,’ should be the message.
Aviva is one of the few insurers which accepts the current price discrimination against longstanding customers cannot go on with boss Mark Wilson describing the market as ‘dysfunctional’.
In announcing the company’s impressive interim results last week – healthy profits plus a shareholder-friendly dividend – he confirmed that the insurer was ‘trialling’ a new pricing structure which rewarded loyalty. The quicker this is introduced the better, although no doubt there will be some devil in the detail as is always the case with policy small print.
The second inconsideration relates to loyal customers who are not price discriminated against but who are left with outdated cover. It was an issue we touched upon seven days ago.
It is prevalent in critical illness cover, an insurance designed to pay out a lump sum in the event of serious illness – cancer, heart attack, stroke and multiple sclerosis.
Many policies bought today are superior to those purchased a decade ago, covering a wider range of illnesses and cancers. But unless longstanding holders of such insurance have the good fortune and common sense to use a respectable financial adviser, they will have no idea that their cover is outdated. Certainly, their insurer will not tell them that it could be in their best interests to upgrade.
No doubt the inconsiderates argue that it would cost them – and their shareholders – too much to inform customers about the benefit of upgrading. But that is just yet another excuse. If they can jam my letterbox with unsolicited offers of everything from home insurance through to an equity release plan (I have none to release, thank you) they can certainly afford to do the decent thing and look after their most loyal customers.
The Association of British Inconsiderates. Shame on you.
Customers get exploited with rising premiums every year despite never claiming