One of the worst habits of the trillion-pound general insurance industry will be brought to an end in April next year.
Even to a cynic, the willingness of many large general insurers to prey on the blind faith of loyal customers is thoroughly distasteful.
Each year, they write with their renewal notices, thanking us for our business and saying there is no need to do anything if the policy still meets our needs.
‘This is an automatic renewal,’ they say. ‘We look forward to providing another 12 months of cover.’
How convenient, thinks the time-poor customer, trusting that the insurer which looks his home and car will have his best interests in mind. Not so, as many of us have discovered to our cost as insurers sneak through exorbitant double-digit increases for no apparent reason other than greed.
It is estimated that the omission of the previous year’s premium in renewal notices costs consumers up to £100 million a year. Which is free money for insurers.
At long last, the City watchdog has woken up and, from the new financial year, insurers must publish details of last year’s premium on renewal notices. That they hadn’t been compelled so far shows just how far behind the regulators have been on this issue.
A year ago, the Financial Conduct Authority (FCA) finally announced a consultation, saying it ‘wanted to address concerns that some consumers pay higher prices if they stay with the same insurer, particularly for a long period of time’.
It cited research showing that the inclusion of last year’s premium on renewal notices prompted between 11-18 per cent more people to either switch provider or negotiate a lower premium when prices sharply rise.
As well as including last year’s premium, insurers must include text to encourage consumers to check their cover and shop around for the best deal. They must also identify consumers who have renewed with them four consecutive times and give these people an additional message to encourage them to shop around. In other words, they must spell out that they cannot be trusted to do the right thing by their most loyal customers. How disheartening.
The Association of British Insurers told Spectator Money that it has never been a requirement for an insurer to show the existing customer a renewal premium on renewal documentation. ‘That said, there has never been anything to stop an insurer from doing it,’ the ABI added.
The FCA estimates a cost benefit to consumers of £64 million to £103 million a year after the new rules kick in. The insurance industry is expected to take a one-off hit of £133 million to implement them. The FCA said that consumers will have to spend £13 million more in precious time to shop around for better deals. It has not offered a cost to the trust that has been lost in all of this.
Bernard Ginns is founding director of www.branksomepartners.com and was Business Editor of The Yorkshire Post from 2008-16
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