You may have heard about new legislation being considered by the FCA to ensure insurance firms don’t punish loyal customers by increasing the cost of their insurance each year.
We wanted to let you know that PayingTooMuch.com has never, and will never, offer different prices to new or returning customers.
Have you ever wondered why premiums rise each year, even if you haven’t made a claim? Often companies will offer a cheaper rate to new customers, sometimes even at a loss, in order to win business. They hope you’ll stay with them for a number of years, not noticing relatively small price increases each year, as they start to increase profit margins.
Under the new proposals, firms will be able to set new rates, but will be prevented from gradually increasing the price paid by existing customers (known as ‘price walking’) above the price a new customer would pay for the same product.
Here at PayingTooMuch.com, every single customer, whether returning for renewal or brand new, is offered the same service, price and products. We believe in being fair, open and honest with customers and providing the best value possible.
The FCA report states: “Firms use complex and opaque pricing practices that allow them to raise prices for consumers that renew with them year on year. While some people shop around for a deal, many others are losing out for being loyal. Firms target price increases on consumers who are less likely to switch and use practices that make it harder for people to leave. At the same time, firms do not always offer regular switchers their lowest prices. The FCA identified 6 million policyholders were paying high or very high margins in 2018. If they paid the average for their risk, they would have saved £1.2 billion. Some of this is due to harmful pricing practices, which the FCA’s proposals aim to tackle.”
Phone vs Online?
The FCA proposals do differentiate between sales channels, so ‘like for like’ comparisons will be made between, for example, an online new price vs online renewal price.
Sometimes, in order to provide the cheapest price online, companies will charge extra for telephone sales. This is to directly reflect the cost involved in running a call-centre, and not normally a profit-making exercise.
Automatic Renewal?
An additional area the FCA report covers is automatic renewal. This is where policies are automatically renewed, at a new price, without new consent from the customer. Some firms stand accused of making it difficult to stop their policy from automatically renewing.
New proposals will require firms to:
- “explain to customers whether their policy is set to automatically renew and what this means for them;
- make it easy for customers to stop a contract from auto-renewing; and
- make it easier for consumers to decline auto-renewal of policies at the time of purchase and at renewal.”
For more information, you can view the full FCA report here.
