Insurance premiums to fall for loyal customers

Insurance companies have pledged to reduce the difference between premiums for new and existing policy holders in an effort to prevent ripping-off loyal customers.

The Association of British Insurers (ABI) and the British Insurance Brokers Association (BIBA) have announced new guidelines aimed at reducing the “excessive” difference in premiums for new and existing customers.

The announcement follows a change in the rules for insurance firms, so they now have to show you your previous year’s premium on renewal notices in an effort to make people shop around for the best deal.

The great auto-renewal rip-off

Andy Briggs, chairman of the ABI, said: “The renewal market simply doesn’t work where loyal customers get charged much more than new customers.”

The ABI and BIBA’s new guidelines include:

• Not supporting excessive differences between new customer premiums and subsequent renewal premiums that unfairly penalise long-standing customers
• Members will take action so that customers’ tendency to shop around at renewal is not used to lead to excessive pricing differences that unfairly penalise long-standing customers
• Firms should make clear in written, online or verbal customer communications that the new customer premium only applies for that year and subsequent renewal premiums may be higher.

At present, these guidelines only apply to home, motor and travel insurance, but not health or pet insurance.

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“I am delighted that insurers and brokers have come together for the benefit of our established and loyal customers, setting out a positive path forward on renewal pricing,” says Lord Hunt of Wirral, chairman of BIBA.

“I would encourage everyone within the wider market to join with us in adopting these guiding principles and action points.”

Don’t sit back and relax

The new rules are a move in the right direction but shouldn’t mean consumers sit back and accept their renewal premiums.

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“For too long when it comes to insurance, loyalty doesn’t pay. It’s about time the industry acknowledged this and tried to reset the balance towards loyal customers,” says Georgie Frost, consumer advocate at GoCompare.

“These ‘Guiding Principles’ are a step in the right direction, but they’re definitely not a signal for consumers to take their eye off the ball.

“Drivers and homeowners must stay vigilant and fight back against rip-off renewal premiums, which can cost as much as £280. The message is simply, never trust your insurer and auto-renew.

“Compare with the rest of the market and if you think your loyalty is being rewarded with excessive pricing despite these new principles, switch to one who’ll give you a better deal for the cover you need.”