Why you should NEVER buy an insurance policy from your bank

BRITAIN’S biggest banks are charging customers up to three times too much for insurance.

Money Mail research found banks’ annual premiums for car, travel and home cover are hundreds of pounds more expensive than insurers usually charge.

And there appears to be little justification for the huge mark-up.

Although banks say their deals are more comprehensive than policies on price comparison websites, we found the cheaper policies online were often identical — and even underwritten by the same firm.

Incredibly, we also discovered that prices varied between different banks owned by the same company.

Justin Modray, founder of consumer website Candid Money, says: ‘This shows how greedy some banks can be.

‘They’re seeing what they can get away with, rather than offering the best deal to regular customers.’

Every year about 2.25 million people buy insurance from a bank or building society, according to the Association of British Insurers.

Most will be loyal customers who bought policies after receiving a marketing leaflet in the post, or popping into a branch to enquire about something else.

Money Mail measured insurance quotes provided by Britain’s five biggest banks against what was on offer elsewhere.

To compare home and contents policies, we shopped for a couple in their 20s with a three-bedroom house in the country. We wanted a basic policy without cover for accidental damage, bicycles or expensive individual items.

The property was presumed to have two bathrooms and to have been built in 2000 with standard brick walls and a tiled roof.

On the Comparethemarket comparison website, LV= offered the cheapest deal, at £97.94 a year. It provided building cover up to £1 million and contents insurance worth £50,000. The customer would have to pay the first £200 of any claim — the so-called policy ‘excess’.

When we punched the same details into the Santander website it gave a price of £327.26 — more than three times as much.

In addition, the bank’s policy has unlimited building damage insurance and £25,000 for the contents of the home. The excess is the same.

A Santander spokesman says its home and contents policies provide ‘consistent, quality cover’ with no hidden fees and a fivestar rating from financial product experts Defaqto.

The bank says it offers better deals to its 123 current account customers, who pay £5 a month.

Even when a bank’s policy has the same underwriter as an online insurer, prices can vary dramatically.

Privilege provides policies by internet and phone, underwritten by UK Insurance (UKI).

It quoted £105.12 for £1 million of buildings insurance and £50,000 of contents cover, with a £200 excess.

NatWest and RBS offer identical policies from the same underwriter, but charge £213.52 — more than double the price.

A spokesman for the banks says the rate is fixed for three years, whereas other insurers increase prices annually.

For travel insurance, we found an annual policy for a couple in their 50s who were planning several trips to Europe for £21.25 with Coverwise.

Underwritten by Axa, it has £ 1,000 cancellation cover, £1,000 baggage cover and medical cover up to £10 million. There is a £150 excess.

Halifax’s policy — also underwritten by Axa — costs £148.94. It has a lower excess of £100, higher baggage cover at £2,500 and cancellation cover of £3,000 — but costs an astonishing seven times as much.

Bizarrely, we found Lloyds — which is also underwritten by Axa — charged £67.63 for an identical policy to that from the Halifax.

The two banks are part of the same group.

A spokesman for Halifax and Lloyds told us: ‘ Axa underwrites a number of travel schemes and each product and pricing model is based on the different customer base, operating model, product and medical warranties, which is standard practice across the market.’

For car insurance we shopped around for a 36-year-old accountant living in a country town who wanted to insure a new Fiat 500 and drive 7,900 miles a year — the national average.

There were no other drivers on the policy and no speeding points on the licence. Our buyer had an eight-year no- claims bonus and had been driving for 18 years.

The cheapest deal we found was from Hastings Essential at £202.37. The total excess was £695.

Meanwhile, on the High Street RBS was charging £317.55 with only a marginally smaller excess of £500.