Insurance premiums rise in spite of loyalty penalty ban
Significant numbers of consumers are still paying more to renew their home and car insurance policies, despite the introduction of a ban on so-called loyalty penalties.
These are the findings from a survey carried out by Which?, the consumer group, based on the views of 14,000 of their members. More than half of those with home insurance and 43% with car insurance are paying a higher premium this year than they did last year. The average increase was £35 for car insurance customers and £41 for home insurance customers.
Out of those customers paying more, half had renewed with their current car or home insurer, while three in 10 had switched to a different provider.
Back in January, the Financial Conduct Authority (FCA), the financial regulator, introduced new rules which banned car and home insurers from offering different prices to new and renewing customers. Previously, new customers were offered discounted premiums, subsidised by the higher prices paid by longstanding policyholders.
In spite of the ban, it would appear that a substantial number of customers are seeing prices go up. This could be down to rising costs for insurers as a result of inflation. When it comes to car insurance, more people are driving since the pandemic and there are higher costs to obtain parts and materials for repairs.
Don’t forget to shop around
It isn’t all bad news though. Which? found that those who haggled with their current provider or switched to a different insurer were able to make significant savings. Shopping around near renewal time can pay off. Car insurance customers who switched insurer paid an average of £43 less in comparison to those who renewed with their existing provider. Home insurance switchers typically paid £103 less.
Overall, there was a 4.6% drop in the price consumers paid for car insurance before the end of 2021 versus between January and June of this year, with an average annual price of £343. Home insurance customers only paid 0.7% less at £329 during the first half of the year.
Unfortunately, the loyalty penalty ban hasn’t been completely effective due to a number of existing loopholes. The consumer group heard from a number of respondents who found cheaper quotes with their current insurer than their renewal offer while they were shopping around.
These discrepancies may be happening because the new loyalty penalty rules still allow insurers to offer customers different prices depending on whether they go directly to the insurer or use a comparison site, for example.
Jenny Ross, Which? money editor, said: “Our research shows it’s still the case that the price quoted by your insurer is not necessarily the best price you can get. Doing your research on comparison sites, haggling and switching remain effective ways of bringing down the cost of home and car insurance.”