Loyal home insurance customers exploited with excessive premiums

Thousands could be paying excessive home insurance premiums, as a Which? investigation reveals loyal customers are penalised with price hikes for staying with a provider.

In an investigation into home insurance premiums, the consumer champion found customers with combined policies owned for longer than a year were paying, on average £75 (38%) more annually than new customers.

For contents cover, existing customers paid, on average, £132 annually – 32 per cent more than new policyholders.

Which? found the disparity between what new and existing customers paid steadily increased the longer a customer had been with the same insurance provider.

Customers who’d been with the same insurer for over 20 years paid the most – around double the amount of what new customers paid. For combined insurance, the average premium paid for a policy 20 or more years old was £396 a year, while for those with a policy under a year old, the annual premium paid was £195.

Insurance pricing is most competitive for new customers – with policies sold at a discount, sometimes at a loss, during the first year to attract new business. However, it notoriously leads to hikes during renewals and can mean long-standing customers are unfairly penalised.

Which? research revealed combined policies that were four to six years old were around 54 per cent more expensive compared to the prices paid by new customers.

It is clear that staying with an insurance provider doesn’t pay, yet 69 per cent of respondents in Which?’s survey had been with their insurer for longer than a year.

Worryingly, one in six of those aged over 75 had held their cover with the same provider for over 10 years and may have seen their premiums almost double in that time.

Which? spoke with one customer who was paying £554 a year for her home insurance after six years with her provider. However, on Compare the Market she spotted the exact same policy was available to new customers for £335, prompting her to cancel her policy and reapply to access the new customer discount – saving £219.

Surprisingly, many insurers do allow customers to cancel their existing policy to take out a ‘new’ one at a cheaper price.

However, vulnerable customers who are perhaps not as savvy online could find themselves paying trumped-up fees to insurers who offer little in return for their loyalty.

Earlier this year the Association of British Insurers (ABI) and the British Insurance Brokers’ Association (BIBA) announced plans to tackle excessive premium differences between long-standing and new customers after it acknowledged vulnerable people were at a disadvantage in the current system.   

Harry Rose, Which? Money Editor, said:

“It is unacceptable that long-standing policyholders are taken for granted by insurance providers and hit by these excessive premiums.

“Customers who prefer to stay with one provider are at-risk of being exploited by these vastly overpriced premiums when little has changed in the service they receive.

“Insurers must make sure existing customers remain a priority, and are not sidelined by the push to attract new business.”

Notes to editors

In May 2018, Which? surveyed 7,996 members of the general public who held a home insurance policy. Policyholders were asked to tell us what they were paying and how long they had been with their provider.

Which? research found the median annual premium paid for a combined home insurance policy is (sample sizes shown in brackets):

  • £270 for existing customers (3,805)

  • £195 for new customers (1,787)

The median annual premium paid for contents insurance is (sample sizes shown in brackets):

  • £132 for existing customers (1,173)

  • £100 for new customers (501)

A table of the median premium paid for combined and contents home insurance policies can be found below:

Content

Combined

New policy (under a year old)

£100 (501)

£195 (1,787)

Over 1 year and up to 2 years

£120 (276)

£220 (927)

Over 2 years and up to 4 years

£108 (312)

£250 (1,278)

Over 4 years and up to 6 years

£144 (180)

£300 (552)

Over 6 years and up to 8 years

£144 (92)

£324 (264)

Over 8 years and up to 10 years

£150 (75)

£329 (191)

Over 10 years and up to 15 years

£156 (97)

£360 (237)

Over 15 years and up to 20 years

£155 (62)

£360 (161)

More than twenty years

£200 (79)

£396 (195)

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