Guest Comment: Don't lose out by being loyal to your insurer
The Financial Conduct Authority's executive director of strategy and competition Christopher Woolard explains why the regulator is examining how insurance firms set prices. Views do not necessarily reflect those of MoneySavingExpert.com.
We know that a lot of MSE readers are savvy about shopping around for a good deal. But imagine if your elderly relative goes to their local newsagent, the one they've been going to for years. What if a first-time customer to that shop gets the same newspaper as your relative, but pays half the price. How would you feel? I think most of us would feel that simply wasn't right.
Competition can deliver good deals to customers who do shop around, and then switch or negotiate a better deal with their existing insurer. To attract new customers, deals are often offered below cost. But we know not everyone shops around.
We've found that people who stay with their insurance provider for a long time often pay significantly more than new customers – even though the costs and risks of providing both groups with insurance may be the same. We've found that customers who have renewed their home insurance with the same firm over five years pay on average 70% more than new customers.
That's why we're taking steps to make sure people get a fair deal and that the balance between new and loyal customers is set in the right place. In particular, we need to take care to ensure that any further action we take doesn't create a different set of winners and losers.
And we have already taken some action. When you get your next email or letter from your insurance provider asking you to renew, look out for information on what you paid last year. Compare this to the new premium offered and consider shopping around for a better deal.
We will now work with consumer and industry representatives to make sure that insurance markets deliver competitive and fair pricing for all customers, regardless of whether they are new or loyal customers.
If you or someone you know has experience of paying higher prices for being a loyal customer, we want to hear from you to help us consider the best way to tackle the loyalty penalty. Please tell us your story in the MSE discussion forum. You can also find further information on our website.