SHAME OF INSURANCE GIANTS

Exposed: Loyal customers ripped off by up to £1,000 a year – to fund cut-price deals for new homeowners and drivers

STAYING loyal to an insurer can cost families up to £1,000 a year.

Firms overcharge by up to three times to fund their cut-price deals for new customers.

Long-standing customers are offered good rates only if they challenge renewal quotes or threaten to leave.

Figures obtained by Money Mail show that insurance giants are effectively levying loyalty penalties.

An audit of 9,000 motorists and 8,000 homeowners by Consumer Intelligence found charges rise every year they remain with their insurer.

The investigation shows that premiums can double even without a change in circumstances. Loyal customers typically halve their home insurance bill when they finally switch.

‘The data shows that loyalty really doesn’t pay,’ said Rod Jones of comparison site uSwitch.com. ‘The longer you’ve been with your insurer the more you are likely to save by switching.’

Since April insurers have had to show price rises on renewal letters. But data

obtained by the Mail raises fears that this is failing to tackle the growing disparity between the prices offered to savvy shoppers and those given to loyal customers.

Research by Consumer Intelligence shows those who moved their home insurer after just one year saved £37, after five years £78 and those who finally switched after nine or more years typically saved £127.

They would have been paying around £250 a year, compared with £124 for new customers. Motorists who switched after one year saved £63, after five years £81 and after nine or more years £117.

Money Mail has been inundated with emails and letters about sky-high renewal quotes. Allegations have been levied at almost every major insurer, including Admiral, More Than, RAC, Churchill, Aviva, AA, Kwik Fit, Age UK, Saga, Axa, Nationwide, Halifax, Allianz, LV, Privilege and Barclays.

Some customers discovered they were being charged up to £1,000 more than the cheapest deal on the market, which was sometimes offered by their own insurer.

Others said their premiums doubled without explanation. Still more said they had to complain every year to fight off £200 hikes.

Ian Hughes of Consumer Intelligence said insurance firms typically paid price comparison sites £40 to £60 for new customers – even for premiums as low as £22. This meant loyal customers had to pay more.

‘Insurers cannot possibly make money on £22-a-year premiums because it costs dou- ble that to get the customer in the first place,’ said Mr Hughes. ‘Companies are so fixated on attracting new customers because it is seen as a sign of health that the focus is not on keeping existing ones.’

He said comparison sites had increased competition, pushing down costs for customers who seek out lower prices each year.

Mr Hughes said the answer was to ban introductory price discounts.

The Financial Conduct Authority’s new rules means all insurers and brokers must display last year’s price on renewal letters – to make any hikes clear. But the law does not apply to business customers.

The Mail has seen renewal quotes for work vehicles that fail to state the price has risen by £300. The broker said this was within the rules.

The FCA insisted its new regulations would ‘improve the treatment of existing consumers by firms’.

Insurers say stealth taxes, bogus whiplash claims and soaring repair bills have driven up their costs.

Ministers raised payouts for personal injury claims in March – a cost insurers have passed on to drivers. The Government will increase the cost of insurance premium tax in June. It goes to 12 per cent – double the rate 18 months ago.

James Bridge, of the Association of British Insurers, said: ‘Insurance is a very competitive market, with many customers shopping around to get the right policy for their needs at the best price. Customers should always remember to buy the policy that best suits their needs, and not simply the cheapest on a price comparison website, or elsewhere.’