Here’s how insurers rip people off just for being loyal. Does that include you?
We’ve been saying it for years – loyalty to insurers, any insurer, doesn’t pay.
Now, the Sunday Times has come up with shocking proof that this is true.
The tale of a customer who insured their home with Halifax for 35 years – and was fleeced in the process.
It's a lesson to anyone who hasn’t used a comparison site in a while.
If you don’t compare your renewal quote with what else is on the market, you can expect to be taken to the cleaners.
In the case of the example uncovered by the Sunday Times, the customer discovered they were paying almost THREE TIMES more than a first-time customer would need to fork out.
The ST reported how Nigel and Jane Jones had been quite content to continue their home insurance policy with Halifax for 35 years.
They never made a claim and they always lived in the same house in Worcestershire. It was quite a shock then to find they were paying 205% more than a new customer.
They had signed up for buildings cover in 1982 and added contents insurance in 2005.
"I suppose I did the usual thing of not really checking the price until about three years ago," Nigel, 65, told the ST.
But when the renewal premium soared to well over £1,000 last year, Nigel began to wonder if they were paying too much.
"That's when I started ringing them up and asking, 'Is this the best you can do?'"
The Halifax told him they could lower his premium by a generous £200, bringing it down to £1,096.
This was all possible because of Halifax’s “valued customer discount”. It also meant a slight drop in the level of cover.
What Nigel wasn’t told was that this was hundreds of pounds more than the price that would be offered to Nigel as a new customer.
When the renewal premium went up this year to £1,361 the couple once again decided to challenge the price.
"I rang them and they said they couldn't do ‘owt about it, so at that point I decided to leave," Nigel said.
A month later Nigel phoned Halifax.
"I asked them for a quote for this same address and they gladly gave me one. I went through what I wanted and they quoted me their Ultimate home insurance package — total annual premium £496 plus £50 cashback as a new customer," said Nigel.
After Nigel complained Halifax told him in a letter: "After considering the additional information and the issues you raised, I've not found sufficient supporting information to agree that you have been overcharged."
This is far from the first time Halifax has been caught out punishing loyal customers – previously they've even admitted that it’s all down to the customer to check they’re not paying over the odds.
Routine rip off
As the Sunday Times points out: “Loyalty is routinely punished across sectors such as energy and broadband as well as insurance.”
Last week, the chief executive of Aviva criticised the "dysfunctional" car insurance market, saying that existing customers subsidised the "too-low" prices used to bring in newcomers.
Earlier this year, the Money section of the Sunday Times revealed how energy and broadband companies were charging loyal customers, including elderly customers, hundreds of pounds more than new ones.
Doreen and Ronald Miller, in their 80s, paid Scottish Power £169 a month for gas and electricity. Their daughter, Jacqui Miller-Charlton, who lives nearby in Tyne and Wear, was quoted £42 less by the same supplier.
Money also found examples of home insurance companies charging loyal customers 10 times more than they did new ones.
In one example, More Than quoted 93-year-old RAF veteran Clarence Clark, from Derby, a renewal price of £546.
This included a "loyalty" discount of £60 for Mr Clark, a customer for 25 years. His son, Chris, 68, found a similar deal from the same company for £82.
The Financial Conduct Authority was urged last month to investigate the whole practice of customer loyalty.
Price of loyalty
Consumer expert, Fred Isaac, said: “It’s excellent that this scandal is being highlighted more widely at last.
“The bottom line is that if you auto renew, you are subsiding a company’s ability to grab new customers.
“This is the way the system has worked for years, the best deals always go to new customers. People must get the message that if they don’t check what else is on the market every time a renewal comes up, they are going to be ripped off.
“It can be hard for some people to believe that they will be treated like this by a big company they have shown loyalty to for many years, but, sadly, this is the reality. The message is simple: do a comparison every time you get a renewal.”
When The Sunday Times contacted Halifax they said the cheaper quote offered when the Jones called as a potential new customer was for "a significantly lower level of cover from his original policy".
The policy on their four-bedroom home included unlimited cover for rebuilding and contents, whereas the new quote was limited to £500,000 for rebuilding costs and £75,000 of contents.
Nigel said he had requested a reduction in his rebuilding cover when he was still a customer of Halifax, as he had felt it was higher than needed.
"I've been in design and planning all my life and I've built loads of buildings and I know that £500,000 would easily rebuild this house — with marble taps," he said.
"I reduced that cover to £500,000 when I asked for the new quote because as a new customer I was allowed to pick, whereas as an existing customer they wouldn't let me touch it."
Mike finally found cover with Saga, for £570.