THE HOME COVER SCAM
INSURERS are hitting homeowners with outrageous price hikes that are up to 25 times higher than they can justify.
In some cases, they are raising premiums by 50 pc — adding hundreds of pounds to the cost of home cover.
Customers are routinely being sent insurance renewal letters that fail to give any reason for the hikes, except for the increasing cost of Government policies.
Over the past year, the taxes charged on insurance premiums have gone up.
Insurers have also been forced to pay out more to customers seriously injured in car accidents.
But experts say these changes should add just 2 pc to home insurance costs and 12 pc to car cover. They say if you’ve been hit by a higher price hike — and your insurer can’t give a good reason — then you are being ripped off.
Money Mail has been inundated by letters from homeowners who are angry that they are being forced to pay more for the same cover without a decent explanation.
Many have been fobbed off with a vague reference to higher taxes when they’ve asked why their premiums have gone up.
One customer whose home insurance premium had gone up 14 pc was told the price change ‘includes the Government’s new rate of insurance premium tax’. The letter offered no further explanation and warned the cover would renew automatically.
Yet insurance premium tax has increased by just 2 percentage points over the past year, rising from 10 pc to 12 pc in June.
Peter Dodds, 76, received a renewal letter saying the insurance for his three-bedroom semi in Seasalter, near Whitstable in Kent, was going up from £114 to £171 — a 50 pc increase.
The retired City trader rang his insurer, Privilege, and was told the price had risen because ‘taxes have gone up’.
When Money Mail asked Privilege for an explanation, a spokesman for the insurer said: ‘The increase in insurance premium tax and our rating on certain risks contributed to the increase.’ Peter calls it a ‘weak excuse’. ‘They’re clearly ripping me off — taxes haven’t gone up by 50 pc,’ he says.
‘The real concern is that these policies automatically renew. So if people aren’t vigilant about checking their post from insurers, the premiums could be bumped up without people realising.’
Peter was even more appalled when he found a cheaper quote online with Privilege for £115.
Alexander Smillie, 74, was also told ‘taxes have increased’ when he asked his insurer why his home and contents cover had gone up by a third.
The will- writer, from Fife, Scotland, said he felt insulted that his insurer, Amlin, tried to explain away the 34 pc hike when premium tax had gone up 2 pc.
‘It’s daylight robbery,’ he says. ‘Clearly they depend on people accepting whatever generic reason they give out.’ Amlin declined to comment. Brian Brown, head of insight for financial information business Defaqto, says: ‘There is no reason for insurers to pass on any more than a 2 pc price rise as a result of the premium tax increase.’
Experts say drivers should also check they aren’t being overcharged. Insurers have been hit with higher costs this year due to a new formula for calculating the compensation paid to victims of major accidents.
Low interest rates mean it’s harder for the seriously injured, who are often left unable to work, to earn interest on the lump sum they receive. So insurers have had to give more money to victims of accidents caused by the drivers they insure.
The changes to this so- called Ogden rate should only really be passed on to motor insurance customers, experts say.
Analysis for Money Mail found that insurers could justify adding 12 pc overall to drivers’ premiums.
Eamonn Flanagan, director of Shore Capital, says you should be suspicious of any increases larger than this.
The exception is where you’ve made a claim in the past year, had a change in circumstances or changed your cover options.
‘Insurers have overestimated the level of rate increase they needed to put through to the customer,’ Mr Flanagan says.
‘They have had to take on new costs, but they are passing them on several times over to some loyal customers.
‘Government policies may add 12 pc to a 55-year-old’s car insurance premiums. But if people are getting quotes three and four times higher than that, the insurer is taking the bulk of that for themselves.
‘For 20 year olds, an increase of 20 pc could be expected.’ Kevin Pratt, consumer expert at
moneysupermarket.com, says: ‘These increases aren’t entirely justified. Insurance companies have an inherent desire to put up prices for existing customers.
‘But it is misleading not to tell customers exactly why they are being asked to pay more.
‘If you’ve been thumped with a substantial increase in premium, then get another quote and shop around.’
A spokesman for the Association of British Insurers says: ‘The UK insurance market is very competitive. While insurance premium tax has doubled in the past two years, prices can rise or fall for a number of reasons and it is always a good idea to shop around when a policy comes up for renewal.’
According to its figures, the average building and contents policy rose by 2 pc between April and June to £302.