You are here: Home - Insurance - News -

Half of drivers think it should be illegal for insurers to overcharge loyal customers

0
Written by:
24/04/2019
Half of drivers think it should be illegal for insurers to charge existing policyholders more than new customers for the same cover, research reveals.

A survey by GoCompare found 61% of Brits feel insurers reserve the best prices for new customers at the expense of loyal policyholders.

While businesses such as retailers, restaurants and hotels reward customers for their loyalty, it has become common practice for insurers to charge existing customers higher premiums than new ones.

GoCompare said a customer who switched provider when their car insurance came up for renewal could save almost £250.

But the findings show that, at their last, renewal 62% of motorists allowed their car insurance to automatically renew.

The so-called ‘loyalty penalty’ has already attracted the attention of regulators, with the Financial Conduct Authority (FCA) taking steps to force insurers to improve renewal information.

Renewal letters must now show both the renewal cost as well as the premium paid the previous year as well as wording to encourage customers to check the level of cover offered is still appropriate. They must also include a reminder that they can compare prices and levels of cover offered by alternative providers.

Where a customer is renewing for the fourth or subsequent time, insurers must alert them to the fact they could get a better price if they shop-around.

However, despite the FCA’s new renewal regime being in force since April 2017, the research found that at their last renewal, only 46% of drivers remembered seeing last year’s premium alongside their renewal price.

Name and shame

Last year, the Competition and Markets Authority (CMA) released a series of recommendations to tackle unfair loyalty penalties.  These include naming and shaming insurers who overcharge loyal customers, and using targeted price caps to protect vulnerable customers.

Lee Griffin, founder of GoCompare, said: “Car insurance is a market where dual pricing has existed for a long time and where comparison sites have made the practice far more transparent for people who can often see exactly how much their current insurer is discounting for new customers.

“There’s absolutely no good reason why insurers should be able to do this – other than they’ve been able to get away with it. Loyal customers have every right to feel ripped-off.”

He added: “The FCA and CMA have taken positive steps to improve the transparency of renewal pricing, encourage customers to shop-around, and to close the gap between premiums for existing and new customers.

“But the onus remains on customers to act to avoid paying more than necessary, rather than on insurers to change their pricing policies. It’s high-time the insurance industry reset the balance towards loyal customers.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

ISAs: your back-to-basics guide for 2018/19

Here’s everything you need to know to make the most of your unused ISA allowance ahead of the 5 April deadli...

A guide to Sharia savings accounts

A number of Sharia savings products have upped their game in recent months, beating more familiar competitors ...

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Coventry BS unveils market-leading cash ISA – but you may need to act fast

The end of another ISA season has seen many providers cut or pull top deals, but some are bucking the...

Close