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Home Insurance: Loyalty doesn't pay - it actually costs

Patrick Christys
Apr 10, 2019

Loyalty pays. No, wait. Loyalty means you pay, apparently.

Loyal families are paying nearly twice as much for home insurance than new customers, campaigners revealed last night.

Research shows that a third of policy-holders stick with the same provider for six or more years, charity Citizens Advice said.

But while new customers are being lured in with the promise of cheap deals, people who have stuck with the same brand find themselves paying average premiums of £325-a-year.

To put it into context, new customers pay an average of £172.

So, what are you waiting for? Go to A Spokesman Said and shop around now for a better deal!

It follows yet another loyalty rip-off that A Spokesman Said reported on last week with Saga insurance, where elderly customers who are statistically less likely to shop around for a good deal end up being stung with ever-increasing fees.

Last year Aviva pledged not to automatically hike annual prices. Direct Line is also believe to be closely watching developments.

The Financial Conduct Authority is reviewing insurers’ pricing practices and could step in to force firms to change their charging.

Trade body the Association of British Insurers said the research overlooked other factors that affect how a firm makes a profit. But it admitted fierce competition between insurers for new business could result in long-standing customers losing out.

Citizens Advice found that 3.75million policies had been held for 11 years or more. More than seven in ten of these policyholders were classed as potentially vulnerable. Charity chief executive Gillian Guy said: ‘It is appalling that home insurance companies are making all their profit from exploiting loyal customers. What makes this worse is that vulnerable people are likely to be the most loyal to their provider.’

The charity raised a complaint to the Competition and Markets Authority last September about loyalty penalties in the mobile, broadband, mortgage and savings market, as well as home and car insurance. The watchdog found that across all five markets loyal customers were being ripped off by £4billion a year, and ordered regulators to step in and take action.

Pensioner Diane, from Kent, had been with the same home insurer for more than ten years and over that time had seen her premiums rise from £1,500 to £3,500.

Diane, 76, who did not want to reveal her surname, suffers from severe arthritis and with no internet access she has found it easier to stick with the same insurer.

But when she received her latest renewal letter and saw her premium was more than 130 per cent higher than the price she paid as a new customer, she felt she had no choice but to look for a new deal in the Yellow Pages.

By switching to a new home insurance provider, Diane will pay £958 a year instead.

She said: ‘I feel I have been taken advantage of – they are just trying to make as much money as they can.

‘I don’t understand how my premium has gone up so much in the last couple of years. For people of my age, to try and shop around is difficult but as my renewals come in I will have to try, as being a loyal customer does not pay.’

Consumer campaigner Andrew Hagger, of personal finance website Moneycomms, said; ‘It’s fundamentally wrong that insurers are penalising loyal customers and that new customers are being offered an attractive low-price deal at their expense.

‘There’s scant reward for loyalty within UK financial services and customers need to realise this and switch to a better deal for their own benefit rather than lining the insurers pockets.’

Hugh Savill, director of regulation at the Association of British Insurers, said insurance firms had committed to review premiums charged to customers who have been with them for more than five years.

He added: ‘We always encourage people to shop around at renewal because, as Citizens Advice confirms, you can often get exceptional value this way.’

The Financial Conduct Authority plans to publish its findings in the summer. 

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