Mail victory as insurer launches monthly cover that doesn’t rip you off
BRITAIN’S biggest insurer has bowed to pressure to offer a policy that does not penalise customers who pay monthly.
Yesterday’s move by Aviva is a victory for the Daily Mail, which has fought against hidden charges and price rises that punish loyalty.
The new policy – Aviva Plus – charges a monthly fee for home and car insurance and can be cancelled at any time free of charge. Until now, Aviva customers who wanted to pay in monthly instalments had been forced to pay extra.
Buyers will also escape automatic annual price rises.
It bucks a trend among insurers to lure in buyers with ultralow premiums – then stealthily raise them 12 months later if a customer does not switch. Rival insurers will now have to decide whether to follow suit. Insurers have long been criticised for charging customers more if they want to pay monthly – penalising the poorest buyers who do not have savings and young drivers whose premiums are particularly high.
The extra cost usually comes in the form of interest payments. These can add as much as £44 to a £400 policy.
The rise of price comparison sites such as Moneysupermarket has made it easier to switch insurer, and triggered a race to reel in customers with rock-bottom premiums.
But offering these ultra-cheap policies is very expensive, and insurers make up the lost profit by raising premiums aggressively in later years if a client fails to switch elsewhere. The price increases tend to hit hardest older people and those without a good internet connection, as they are less likely to shop around at the end of their 12-month initial contract.
Aviva Plus comes with a guarantee that customers will never be charged extra for loyalty – longstanding customers will pay the same as if they were new ones. The policies, which are currently available to 10 per cent of Aviva’s customers and will be offered to everyone in the new year, also charge no fee if a user wants to change address or other details.
This is another hidden cost often used by insurers to squeeze out extra cash.
Andy Briggs, who is head of UK insurance for Aviva, said: ‘Our customers don’t like the fact they are quoted an initial annual premium, and as soon as they say they want to pay monthly it goes up.
‘They’ve expressed a real concern about renewal pricing, where the most loyal customers end up paying more than the new customers.’
Aviva will continue to offer its regular policies, which are more expensive if paid monthly and can include extra fees. But Mr Briggs hopes that most clients will eventually switch to the new service.
The product will not necessarily be cheaper for new customers than deals offered by rivals. But Aviva claims they will save money over the years because annual rises are ruled out.