The case of Nigel and Jane Jones has further added to the general perception that insurers cannot be trusted. They had happily been covered by Halifax home insurance for 35 years. In all that time they had never made a claim, and had always lived in the same house in Worcestershire. They were shocked, then, to discover that they were being charged more than three times as much as a new Halifax customer.
The couple signed up for buildings cover in 1982 and added contents insurance in 2005. When the renewal premium came in at £1,361 this year, Mr Jones felt enough was enough: “I rang them and they said they couldn’t do owt about it, so at that point I decided to leave.”
A month after cancelling the policy, he called Halifax. “I asked them for a quote for this same address and they gladly gave me one,” said Jones. “I went through what I wanted and they quoted me their Ultimate home insurance package — total annual premium £496 plus £50 cashback as a new customer.”
The Joneses found cover with Saga, at a cost of £570.
Sadly, the Joneses’ case is not unusual. Loyalty is routinely punished across sectors such as energy and broadband as well as insurance. Last week, the chief executive of the leading insurer Aviva criticised the “dysfunctional” motor cover market, saying existing customers subsidised the “too low” prices used to tempt newcomers.
We know that part of the problem is down to insurers’ methods for securing new customers. By competing to get to the top of the comparison tables, they offer their lowest prices and that comes at a loss to them. A loyal customer is then seen as an opportunity to ramp up the price over a number of years to recoup the costs of acquiring customers in the first place.
In another case, More Than quoted 93-year-old RAF veteran Clarence Clark, from Derby, an automatic renewal price of £546. The cost of the home contents policy included a “loyalty” discount of £60 for Clark, a customer for 25 years. His son found a similar deal from the same company at £82.
Last month, the Financial Conduct Authority was urged to investigate the cost of customer loyalty. A report by the Financial Services Consumer Panel expressed frustration at the behaviour of financial services companies towards long-serving clients. The Joneses’ case illustrates that the problem is not confined to vulnerable older people perhaps unfamiliar with shopping online or challenging quotes over the phone.
Whilst insurance professionals know that the best deals will always go to new customers, and that everyone should shop-around and not just accept their renewal quote, this does not excuse the disgraceful antics of some insurers who rip-off their loyal customer base.
At Human2Human we are involved in working with a growing number of new insurers who put transparency and service at the top of their priorities. It is little wonder why such businesses will no doubt flourish and prosper when the antiquated practises of some more traditional insurers continue to heap mistrust and disdain on our industry.
To find out more about this story and what makes Human2Human Consulting different, please click here or email us and let’s chat. We are just as nice to new customer as we are to our loyal long standing customers, because that is the only fair way isn’t it?