Loyal customers hit with ‘excessive’ insurance premiums
People with combined buildings and contents policies owned for longer than a year paid on average £75 or 38% more a year than new customers, according to consumer group Which?
Insurance pricing is most competitive for new customers – with policies sold at a discount, sometimes at a loss, during the first year to attract new business.
However, this often means insurers hike prices during renewals so long-standing customers are unfairly penalised.
And the longer you’ve had your policy, the more you’ll pay compared to new customers.
The study found people who’d been with the same insurer for over 20 years paid the most – around double the amount new customers paid. For combined insurance, the average premium paid for a policy 20 or more years old was £396 a year, while for those with a policy under a year old, the annual premium paid was £195.
One customer who was paying £554 a year for her home insurance after six years with her provider spotted the same deal on Compare the Market for new customers for £335, prompting her to cancel her policy and reapply to access the new customer discount – saving £219.
While staying with an insurance provider clearly doesn’t pay, 69% of people polled by Which? had been with their insurer for longer than a year.
Worryingly, one in six aged over 75 had held their cover with the same provider for over 10 years and may have seen their premiums almost double in that time.
Earlier this year the Association of British Insurers (ABI) and the British Insurance Brokers’ Association (BIBA) announced plans to tackle excessive premium differences between long-standing and new customers after it acknowledged vulnerable people were at a disadvantage in the current system.
Harry Rose, Which? money editor, said: “It is unacceptable that long-standing policyholders are taken for granted by insurance providers and hit by these excessive premiums.
“Customers who prefer to stay with one provider are at risk of being exploited by these vastly overpriced premiums when little has changed in the service they receive.
“Insurers must make sure existing customers remain a priority, and are not sidelined by the push to attract new business.”