It has been announced that the way in which home and car insurance policies are priced is to be studied by the Financial Conduct Authority (FCA) looking at the scale of the issue, whom it affects and possible solutions.
In an analysis of the home insurance market, the FCA said there was evidence of significant price competition for new customers with new policies offered at 30% below the cost of providing the policy and firms increased premiums in the second and third years of the policy. The Citizens Advice Bureau has already warned loyal customers are being "ripped off" by many insurers.
If you fail to shop around, then you could potentially be out of pocket by hundreds of pounds. If your premium has increased, your insurer may reduce the premium if you were to call them, but you must ask yourself, why didn’t they offer this reduced rate to me in my renewal letter?
This is not just limited to the home and car insurance industry as other services can increase dramatically over time if you don’t switch to a new provider, most notably broadband and mobile phone contracts.
Some insurers may not allow you to cancel your existing policy at renewal in order to obtain new customer rates or deals. You will have to be with another provider for at least 12 months before being classed as a ‘new’ customer.
Since new regulations came into force where insurers must display the previous year's premium, people are now more likely to notice price increases, but a third of consumers still renewed their policy without checking for better deals first. It could be down to forgetfulness as you have a limited time to find a new provider before the policy is automatically renewed.
But there are ways to limit being penalised. Steve Rayner General Insurance Channel Manager from payingtoomuch.com said: “We have known for years that this [being penalised] has been happening, and that is why payingtoomuch.com always searches for the cheapest policy at renewal. Unfortunately, vulnerable people are more likely to be penalised by insurers as they don’t want the hassle of switching to a completely new service and researching all the different prices so allow their policy to roll on. This is where we come in and do all the hard work for you”.
Customers who use payingtoomuch.com to buy their insurance policies not only get new rates each year but receive reward points which can be cashed in. If you would like to get a quote for your home or car insurance, call our team on 01243 219 333 today.