If you haven’t changed your home insurance provider for years you’re probably paying a “loyalty penalty” because insurance companies aren’t giving you the best deal, according to new research.
Home insurance companies in the UK make all of their profits – over £1bn a year – from loyal consumers who have held a policy for six years or more, according to Citizens Advice, with vulnerable people most likely to pay the most for their home insurance.
It estimates that in the UK 3.75m policies have been held for 11 years or more, with more than 70% of those held by vulnerable customers, for example those with mental health issues. Citizens Advice has called on the regulator, the Financial Conduct Authority, to take action.
Diane, a 76-year-old pensioner from Kent has been with the same provider for over a decade. “I see the increase in price every year but for me at my age, I find it difficult to shop around. It’s just easier to stick with what I know.
“I had my home insurance with the same provider for over 10 years. I see the increase in price every year but for me at my age, I find it difficult to shop around. It’s just easier to stick with what I know.” Her insurance provider gave her a renewal quote of £3500 a year up from £1500 but she used a Yellow Pages directory to shop around and found a better deal for £958.
“I feel I have been taken advantage of, they are just trying to make as money as they can. I don’t understand how my premium has gone up so much in the last couple of years. For people of my age to try and shop around is difficult but as my renewals come in I will have to try as being a loyal customer does not pay,” she said.
The research also reveals customers pay an average annual premium of £325 for their sixth year of insurance – almost double that of new customers (£172).
Gillian Guy, chief executive of Citizens Advice, has submitted a complaint to the FCA about high renewal quotes for vulnerable customers, which she called a “systematic scam”.
“It is appalling that home insurance companies are making all their profit from exploiting loyal customers. What makes this worse is that vulnerable people are likely to be the most loyal to their provider,” she added.
How To Switch
Rather than sticking with your current supplier, it’s worth shopping around first to see if you can get a better deal. Check out comparison sites like Compare The Market to see which deals are the most competitive, or call suppliers direct.
It’s also worth haggling with your own provider to see if they’ll offer a better deal – just make sure that if you do cancel, you’ve read the terms and conditions to make sure there’s no penalty or charge attached.