Loyalty is not a good thing when it comes to insuring your house or car. Existing customers are often hit with higher premiums than new applicants. And as a ban on the practice looms, some customers are reporting increases of up to 50% to renew their policies, despite reports of price falls.
Research from complaints website Resolver shows the “loyalty penalty” is still in effect, with three quarters of people surveyed reporting rises of between 10% to 50% to renew their car, home, travel and even pet premiums.
“While evidence suggests the cost of a new home or car insurance policy is dropping, people using Resolver are still reporting price increases at renewal despite their circumstances not changing in the last year,” says the site’s Martyn James.
“It’s really disappointing that despite all the criticism and warnings over the last 10 years and more, this continues.”
Respondents to the survey said they were frustrated about not getting a better price and having to haggle for a better deal. But contacting the insurer did not always get better results – one in three who tried to bargain got no discount.
A changing market
The Financial Conduct Authority said in May that the practice of “price walking”, where premiums go up as a matter of course year on year, would be banned from 1 January 2022. This was after it found the average new customer paid £285 a year for car insurance, compared to £370 for someone who had been with the company for five years or more. For home insurance, new customers paid £165, while after five years, premiums increased to £287.
Many people could see their premiums fall as a result of the ban, but for those who shop around, the cheapest deals could evaporate. And even before the ban, prices could start to rise, warns Ryan Fulthorpe, motoring expert at comparison site GoCompare. “You are likely to see premiums increase over the next few months in readiness for 1 January where insurers are looking to balance their books,” he says.
Getting the best price for car insurance can be a laborious process. Martin Lewis of Moneysavingexpert recommends getting quotes on all of the four big comparison sites – MoneySupermarket, Comparethemarket, Confused.com and GoCompare – to get a full view. It is worth then checking with Direct Line, which only offers products directly, to get as wide a view as possible.
Figures from Comparethemarket show the average premium was £629 between March and May, the lowest since 2015. It says the fall is in part due to a drop in claims during successive lockdowns, but that the insurers are also competing on price as the postponement of driving tests and fewer new car sales mean fewer customers.
But it says that as drivers have returned to their cars after lockdown, prices have already started to go up and this is likely to continue. “As the remaining Covid-19 rules are set to be relaxed, and more people head back into the office, we may see more car insurance claims causing the cost of premiums to accelerate back to pre-pandemic prices,” says Dan Hutson, head of motor insurance.
Drivers could switch their policy earlier than their renewal date to avoid a rise in prices, he adds. However, both Hutson and Fulthorpe warn that cancellation fees may have to be paid, which could make the savings redundant.
Zurich, for example, charges £50 for cancelling a policy, a figure that consumer group Which? says is common throughout the industry.
Drivers should also ensure that the details they give insurers are as accurate as possible. Whereas someone may have driven just 6,000 miles a year during lockdown, that may increase as restrictions lift. And the car that used to be parked outside a home during the day may now be left at a train station as the driver goes back to the office. Both would affect a premium price. “Try and make sure that the information put in is as accurate to the driving behaviour as possible,” says Fulthorpe.
Protecting the home
Home insurance has been on the up for the last few years. Figures from Comparethemarket show the average premium was £158 at the beginning of 2018. This rose to £177 for the first few months of this year.
Some policyholders will have to pay more for their cover. The Association of British Insurers says people who have adapted their home during the pandemic – by having renovations, or using an outbuilding as a home office, for example – should contact their insurer. Rachel Springall, of financial information site Moneyfacts, says the value of a house can increase as a result, which would mean paying out more to cover the structural value.
As people return to the office and spend less time at home, they may be less likely to notice problems with the property that would affect the premium price. “Occupants may not be at home as much to pick up on structural issues – water leaks, garden upkeep etc – and may then want to consider calling on a surveyor if they want some peace of mind before their policy is due for renewal,” advises Springall.
Consumers fearful that their home insurance will go up as a result of returning to work and leaving their house empty will have to wait. The Association of British Insurers says the cost is dependent on what claims are made, which will not become apparent until later in the year.
Some home insurance claims have declined in the last 18 months, says Chris King of Comparethemarket, with pipe leaks down as people have been at home and able to find problems sooner. As some were at home in winter, when usually they would have been on holiday, there was also a reduced chance of pipes freezing. Anecdotal evidence suggests home thefts are also down, he says.
Securing vital travel insurance
In a year marked with frequent disruption for holidaymakers, the advice from many commentators has been to make sure that you have travel insurance. However, consumer group Which? has found that less than 1% of policies give a comprehensive cover for Covid-related disruption.
Which?’s Rory Boland says that thousands of people are being told by the NHS’s test-and-trace system to isolate, which throws up concerns about whether they will get their money back.
“This presents a risk over the summer, because if you are told to isolate, your holiday company or airline won’t automatically refund you. There are a limited number of travel insurance policies that cover this, so it’s essential consumers shop around for one that does.
“Some holiday companies with flexible booking polices also offer refunds for travel that can’t take place because of a test-and-trace notification.”
The Travel Pack policy from Barclays Bank and HSBC’s Select and Cover are rated as having the most comprehensive policies on the market, which include cancellation due to FCDO (the government’s travel advice) or lockdowns.