We all want better value insurance. But, the press has had several stories, prompted by a ‘market review’ by the Financial Conduct Authority (FCA), about how some insurance companies may be exploiting ‘loyal’ customers. The FCA estimated that 6 million customers are likely to pay higher premiums than they should!
They are taking this very seriously and firms that exploit consumer loyalty by overcharging longstanding customers could face fines under plans announced late last year.
Here is an overview of the FCA’s executive summary and some straightforward guidance tips to avoid overcharging. You can read the report on this reference link.
The problem and how you can get a better deal!
The Financial Conduct Authority has investigated unfair insurance pricing. They found that:
- Insurers often sell policies at a discount to new customers and increase premiums on renewal, targeting increases at those less likely to switch.
- 1 in 3 consumers who paid higher premiums showed at least one characteristic of vulnerability, including having lower financial understanding or capacity.
- For consumers who bought combined contents and building insurance, lower income consumers (below £30,000) pay higher margins than those on higher incomes.
- People paying high premiums are less likely to understand insurance or the impact that renewing can have on their premium.
- Firms engage in a range of practices to raise barriers to switching.
- Many consumers who switch or negotiate their premium can get a better deal.
What is shocking is that the people who are most at risk are the elderly, the less well informed about financial products and those who cling to the belief that loyalty counts in customer service.
So, what are the easiest steps to a better deal?
Here are some lesser known facts and tips about shopping around. Most people (and insurers) will think about their policy in the last few weeks before renewal but:
- Don’t leave things to the last minute – mark a calendar or set a reminder to look at your insurance policy;
- Give yourself a little time to shop around (see below), keep in control of your renewal and help make sure it’s on the best terms for you.
- Talk to your current insurer:
- If you have more property, or got rid of stuff, the level of insurance you need might have changed. You may be overpaying or run the risk the insurer not paying up as much if you are ‘underinsured’.
- Ask them if you have earned a no claims discount – assuming you haven’t made a claim or if you are a long-standing customer.
- Is your renewal more expensive than last year? Tell them, that you’ll shop around – this may bring about an instant reduction. If not, ring off and check out the field…
- Check a Comparison Site? Yes but…
- Not all companies put themselves on comparison sites! Partly because these sites take a cut and some insurers think they can offer you a better deal direct.
- Some providers on the comparison sites may not have the levels of customer care that you should expect.
- Comparison sites are good for quotes with a known provider or for use as a bargaining chip for a lower price.
- Shop around and listen to friends
- Talk to family and friends compare premiums and their experiences.
- Go back and negotiate
- Don’t feel confident to negotiate with your insurer? JUST DO IT! Tell your old insurer what you have as an offer and ask them to match it.
- Even if you stay with your insurer, you will have the satisfaction of knowing you have got a fairer deal.
When the ‘powers that be’ say that they are concerned that customers who do not switch are paying higher prices for their insurance, YOU KNOW ITS TIME TO SHOP AROUND.
We hope this was helpful but we welcome feedback. We’re veterans so, we can take candid comments. If you have personal tips or experiences to share with us, we’d like to hear from you.