Every year people in the UK spend an astonishing £78billion on insurance premiums. The Financial Conduct Authority (FCA) report that more than four out of five people have at least one insurance policy—with home and car insurance the most common.
On Friday, the regulatory body, the FCA exposed how renewing car insurance with the same company could end up costing consumers £130, outraging campaigners and MPs. This leads us to ask; with the price of motoring ever increasing, can drivers still afford to be loyal?
The cost of loyalty
Insurance is a business famous for securing customers with offers that appear to be bargains, only to raise their premiums every year, resulting in drivers who don’t switch policies ending up paying far more than those who comparison shop.
Yet, if insurers charged all customers the same cheap prices offered to new customers, they wouldn’t make any profit. If they charged costlier, but higher rates to everyone, they’d lose customers to firms who continue to offer low introductory premiums. It’s a vicious pricing circle.
The FCA released figures showing how motorists who stay with the same insurance company for eight consecutive years may end up paying over £130 more than those customers who switch to a better deal every 12 months.
Their most recent figures also show that a driver who compares prices saves an average of £64 each year.
Years with an insurer and average yearly saving if you had switched
One year: £64.49
Two years: £65.47
Three years: £77.92
Four years: £77.91
Five years: £96.53
Six years: £88.93
Seven years: £63.54
Eight years: £130.83
Source: Financial Inclusion Commission/Financial Conduct Authority, via the MailOnline
Figures from the price comparison site GoCompare, show that switching to a different car insurance provider can save you a huge £268.69, yet despite knowing, by shopping around, they might make savings, a huge 65% of drivers renewed with their existing providers in 2018.
‘Shocking figures’
James Daley, Managing Director of the consumer group Fairer Finance, said:
“The more loyal a customer is, the more they get ripped off and the higher price they pay. This isn’t easy to solve.
“Price-comparison websites create fierce competition for new customers, and firms are looking to recover the money they lose on cheap introductory offers by getting it from customers who stay with them.”
Towards the end of last year, after a ‘super-complaint’ by Citizens Advice, the Competition and Markets Authority (CMA) found that loyal customers paid £4billion too much for certain financial services, with around 12million overpaying on their insurance.
Labour MP, Wes Streeting said:
“Good companies should recognise and reward loyalty from their customers.
“These shocking figures are a reminder of why shopping around is really important to get the best value for money.”
Car insurers have also received criticism for charging customers more to pay their premium monthly rather than in a lump sum each year—charging interest, like a loan. Experts believe large insurance firms earn up to £500million each year from this practice.
Time well spent
As customers, we still let insurance companies get away with overcharging us, because so many of us don’t realise it is happening, or switching provider seems too much effort. There are also people who don’t or can’t access the internet to aid them in their search.
To find a better deal:
Look at your latest policy paperwork (or email if you took out the policy online and you receive only paperless communication) to check what you’re paying. Even if your insurer was the cheapest last year, you shouldn’t assume the price they are offering is still competitive.
Check to see what your existing insurer would charge you if you were a new customer and, if you’re unhappy with the difference, contact your provider and tell them you’ll switch to another insurance firm unless you get a better deal.
If your current insurer won’t reduce your premium, begin your policy shopping using a price comparison tool. There are many comparison sites available and, depending on how much time you can devote and how much motivation you have, a good place to begin is with Confused.com — one of the leading comparison sites available.
Independent research carried out last year by Consumer Intelligence shows that shopping around could save 51% of car insurance customers £272.24.
Make sure you’re searching for a like-for-like policy and that you understand any charges, exclusions, penalties, and the terms and conditions. And always check the small print!
Once you’ve signed up for a new policy, set yourself a reminder for a week or two before the policy expires, allowing yourself time to shop around to get the best deal and not risk driving uninsured.
Do you think insurance companies should stop offering new customers bargain prices if loyal customers have to pay higher premiums? Do you comparison shop every year? Tell us your views in the comments.
Yep; I’ve changed insurers every year for the last 5 years (at least), and got a better deal than the renewal each time. I can understand them hiking the renewal premiums when it was a pain to switch, but now it’s so easy I’d have thought they’d stand to gain by only increasing it to cover inflation…
Yep me too. One point which comes up every year though – different comparison sites produce different premiums for the same company, same cover. How can this be I ask myself? (Although I’m pretty sure I know the answer and it’s related to the thing with 5 fingers at the end of your arm). As usual you have to watch them like a hawk!
It’s the difference in the commission paid to different sites. What massively irritates me is getting a renewal quote, £200 more than you paid the previous year. Telephoning gets you no decrease (‘sorry, we can’t do any lower than that’) but try a comparison site and you get the same premium as the previous year with the SAME BLOODY COMPANY!
Same company 2 years running!! I have same cover, same no claims bonus, but just gone through comparison site. When the company call to ask if I am renewing my policy, I say no, they ask who have I gone with? And I say WITH THEM under new policy. Doesn’t seem to worry them thou.
I’ve been with the same insurance company for the past six years, for the simple reason that they continue to provide the cheapest insurance for me. Every year I go through the various comparison sites getting quotes, and not one has ever come close to my current insurer, let alone beat it. I just renewed my car insurance last week, which cost £375. The renewal quote was for £392, and the best online quote I could get was £460.
Which insurance is that?
My wife and I each saved more then half the premium by changing insurer.In my case I found that for half the price I could change from TPF&T to comprehensive.
We’ve been with the same insurance company for 5 years on a multi vehicle basis. I’m definitely not on Auto renew which I think is a licence to boost premiums. Each year my renewal documentation shows the presvious years premium in comparison to the coming year. Yes it has risen each year but on small percentages. I ended up with my present company by direct communication, not via comparison sites and found it was a more personal transaction and has remained that way.
Been preaching shopping around for years, my converts are reaping their rewards. The savings are out there folks – go for it!
The savings are out there folks – I have been preaching this for years. My ‘converts’ are reaping their rewards!
It is about time insurance companies became more transparent. If an accident (or accidents) are not your fault and there is no financial penalty for your insurance company why do premiums rise? The excuse usually used is that you as a driver are a risk over circumstances beyond your control and you cannot affect. The ABI should issue motorists with guidelines as to what impact on premiums each of the questions have and what motorists can do to (legally and honestly) to minimise their premiums.
We all know that insurance is a rip-off and that companies can charge whatever they want for premiums, but motorists should be made aware of the steps that they can take to reduce their premiums.
I’m with you spider, you need to tell your insurance of ANY insurance claims made on your policy or one your named on, also company cars and Van’s too. Your home insurance too, cos if you have been burgled, your something like 46% chance of being robbed again and this time they may take your car, so up goes your car insurance, claimed for a lost mobile? Clumsy, will put your insurance up, been run into, oh dear, more likely to crash again in the next 12 months, up she goes! Oh an don’t dare to try me, it’s all on computer here, linked to your name an address so lie and we don’t pay out! Complete joke, oh an watch out for insurance companies who have max 6 years or so no claims, you put your paper in saying 35 years no claims an when you get it back it says 5 years, an they say yes sir, that’s all we do. So your cheap insurance has just cost you the proof of a life time of good driving.
Mine has gone down this year! Unbelievable! 1st time ever
My van renewal this year was £370, brokered by Hastings, underwritten by AXA. I shopped around and renewed at £219. Brokered by Hastings. And underwritten by AXA. Who’d have thunk my own insurance company was trying to rip me off???? This is why I shop around every single year without fail.
I suspect it is the complexity of insurance policies and consequent application forms that make clients tire of comparison. I was a committed switcher until I realised that despite lengthy conversations with sales people the previous year, things like swingeing voluntary excesses can easily be overlooked, or that the distance from a watercourse can be extended to trap you into thinking you are getting a good deal on home insurance. Offering legal cover when it is already included in the policy is also a good and funny (to them) getting their paws on your cash. Offering reduced premiums to couples, when people living alone use the car far less is another dirty trick. I don’t think it would be honest to add my daughter to my policy when she lives at the far end of the country and she could still drive it on a 3rd party extension if she needed to. I have renewed my motor insurance with the same company twice now, but only after checking each time that I can’t better it by going elsewhere, and I did check. My late husband who encountered it in settlements connected with members of the public hitting his company’s vehicles said it was the best for settling promptly without fuss. I therefore bore this in mind while not entirely trusting it without checking.
My insurance hovered around £400 over several years with More Than, though I did find that on comparison sites they were cheaper. Phoned and got a discount more or less in line with the comparison site. However it went up again the following year and I switched to Saga @ £380.This year they wanted £418. Comparison sites would offer from £290 but you need to check like for like. In the end, prepared to move, I phoned present company (Saga) and said I wasn’t happy. Friendly agent asked if I had checked like for like on potential policies and admitted in so many words that new customer discount was the name of the game. When he offered me £366 I was rather surprised but grateful.
Loyal customers are always ripped off, I always remove auto renewal and use comparison sites,I’ve saved £63 this year with a new company with the same benefits as last year.
I always check the market when reinsuring my vehicle. I have found that my present insurer (AA) have always been able to do a deal to keep me with them by reducing the renew premium to a reasonable level. It always works.
I received my renewal notice with a well known supermarket firm but wanted to change a couple of items which did reduce the price, however having already done some work on a comparison insurance website managed to get a saving of £200 plus with the same supermarket insurer. Their answer “Ah we don’t get to see those offers when we send the renewals out”. Bottom line is look around, you get nothing for loyalty.
When I was in the Royal Air Force I first insured through a broker who specialised in Service insurance. Every year they sent me a list of companies and prices showing what new policies cost. I stayed with them for 57 years, never got ripped off. Last year they were bought out by another company and my premium for comprehensive insurance went from £312 pa to £528, When I queried why I was told it was the best deal they could get for me due to age.
I went on Confused.com and found a policy which covered all my needs for £317. I then found that if I added the policy to a well known insurer of housing, I not only got a lower house insurance, but also got the car policy for £287.
Proves loyalty does not pay. My house and car insurance combined now cost £537, only slightly above what my quote from the previous company wanted for car insurance alone.
Certainly paid to look around, and also check multiple item policies to see how much house and car insurance cost on a multiple items policy.
How useful to know it really does work to swap around each year. Let your current show you the new price then compare exactly with a comparison site. As usual you come up with helpful facts to confirm our suspicions! Thanks PP.com
I have rarely used the same company 2 years running, they invariably try to increase the policy premium.
insurers discount the first year in the expectation of auto renewal for subsequent years and a ramped up premium. Just shop around every year, and don’t buy unwanted extras like legal protection.
So Ken can afford 180 quid an hour for his legal fees when it goes t#ts up? Pay up for legal protection, I was involved in a accident, not my fault, took 3 years and 120 grand to put right.
I was getting impatient waiting for my next years car insurance renewal, I went online to my insurer and got a quote that was £67 cheaper than my insurers quote that arrived 4 days later
I found that while I got great service from Aviva they quietly inflated the renewal premium by a substantial amount year on year. I was caught out then first year but not thereafter.In the end I got all three cars insured by a new insurer for the same premium more or less than one insurer was about to charge just for one vehicle. It pays to check and shop around.
I am not sure they dont reward customer loyalty as operating in the way they seem to do just alienates what would otherwise be repeat business.
I shop around each year. Just saved myself £125.
I learned my lesson with AVIVA house insurance. For years I allowed auto renewal then when I had access to a computer I did a comparison and went from £800 to £78. Robbing Blasters. The car insurance comparison sites are good but this year I have gone with Direct Line and made a phone call the day the policy arrived to cancel auto renewal. I fail to understand why there are so many option boxes for Breakdown, Legal, Protected No Claims yet auto renewal requires a phone call to cancel.
Got a shock regaomy policy renewal
£150 more than what I paid last year!!!
Never claimed
Surely it’s best to shop around