Avoid loyalty premiums: shop around for insurance urges Citizens Advice
The delayed report from the Financial Conduct Authority (FCA) on the effect of “loyalty premiums” on renewing customers has just been published (4 October 2019).
It’s based on the results of research which we first reported on back in May.
And the results are pretty damning:
- Insurers commonly sell policies at a discount to new customers and increase premiums for current customers who renew
- Some insurers specifically target price increases at the customers who are least likely to switch
- As a result 6 million UK insurance buyers are paying an average of £200 more on their premiums than they need to
- One in three of the people significantly overpaying are vulnerable in some way: they may be elderly or lower paid, and have poor access to the internet for price comparison
“Super-complaint” about inflated insurance costs
The investigation was triggered by a “super complaint” about loyalty pricing made by Citizens Advice to the Competition and Markets Authority to the Competition and Markets Authority, back at the end of 2018.
- The FCA has found that insurance markets “are not working well for consumers”:
- They use a practice known as “price walking” to raise premiums for customers who renew year after year.
It is not fair – it makes me feel cheated. Insurance customer interviewed for the market study
How can renewing insurance be fairer?
The FCA are considering:
- Banning or restricting price rises for renewing customers
- Banning practices that discourage switching, such as automatic renewals
- Forcing insurers to be more “transparent” about their dealings.
IMAGINE IF… Your insurer made it very clear each year how much more you’ll be paying for your insurance THIS year compared with last year.
And if your insurer told you how much LESS they’ll be charging a new customer for the same level of cover.
Meanwhile, what can you do?
Citizens Advice says the market should be set up to ensure everyone’s treated fairly, and it shouldn’t be up to insurance customers to find the best deals.
But in the meantime their advice is:
- Shop around
- Opt out of auto-renewals
- Make a note of all your insurance expiry dates
- Use price comparison websites
Compare your current insurance costs with what you’d be offered by other insurers: