Business & Investment

Insurance companies have been forced to prove that they have stopped ripping loyal customers

‘Trussst in me’: Like Kaa, the evil snake in The Jungle Book, insurers have been accused of preying on customer trust.

For the past six months, I’ve been digging my tentacles into the prickly lower abdomen of the insurance industry. Strange spiritual image? Yes, but be patient – ​​there is a way for my madness.

In a nutshell, I’ve been trying to assess whether the industry is playing fairly against the new rules imposed by national financial regulators.

A rule designed primarily to prevent loyal customers (religiously updating home and car policies without fuss) from being fooled by greedy insurance companies.

They won a fair deal equal to the price paid by new customers, did not pay a “loyalty” premium for neglecting to shop each year, and were no longer used by trusted businesses.

The more you dig, the more frustrating you are. We know from the bottom of our heart that some insurers are not in compliance with the new regime, but it is undoubtedly almost impossible to prove it.

Insurance companies are sly organizations that excel at protecting their business interests and denying fraud.

“You are not comparing like Mr. Prestoridge,” when I show them evidence that existing customers were still able to get cheaper insurance from them as new customers. Tells me.

“Jeff, Jones didn’t disclose the claim of the windshield that was destroyed five years ago, so he got a cheaper quote as a new customer.” Hmm.

“Mrs. Jeffrey, Mrs. Begins, received a quote using a different business channel than the one she used when she first joined us, so she was able to get a better deal as a new customer.” Really? How confusing.

Excuse, excuse, and more excuses – they are good at coming up with them. Slippery like a snake.

Still, my relentless claim to the industry’s hunger seems to be beginning to bear fruit. Last week, the Financial Conduct Authority told me that insurers and insurance brokers were asked to prove that they were no longer discriminating against loyal customers.

Some of the companies surveyed are those with business practices that I have questioned in recent months.

Others are believed to have been included as a result of letters from the MP (on behalf of members), communications sent directly to the FCA by angry policyholders, and complaints by consumer groups.

The FCA also congratulated the work we did this year (see below). This is a rare praise that I will gladly bring to the grave. Hula. OK, not a big step forward, but it’s a step forward.

Regulatory praise to us as it raises the fever of fraudulent businesses

This is what the Financial Conduct Authority has told us about its work and our campaign.

“We are pleased to see some early positive signs of the effectiveness of reforms in addressing non-life insurance loyalty premiums, but actual renewal costs are declining across the industry. However, we are aware that some customers may have higher costs.

Our new regulations eradicate bad practices for loyal customers and prove each year that businesses are acting in the best interests of consumers or facing serious consequences. I’m sure I will request it.

We test data from insurers of various sizes to make sure we are fulfilling our obligation to eliminate discrimination against loyal customers and where the increase is fair in proportion to the macroeconomics. I understand. Changes in conditions and operating costs.

We take decisive action if we reveal evidence that our regulations have been deliberately ignored or that we cannot show that the company has acted in the interests of our customers.

We are grateful to the market intelligence provided by the Mail on Sunday and many other stakeholders, as well as to the many customers who have been very helpful in conducting this industry assessment.

Our new regulations require eradication of bad practices for loyal customers and annual proof that businesses are acting in the best interests of consumers or facing serious consequences. I’m sure.

“Loyalty Penalty” Backdrop …

A new system for managing car insurance and home insurance pricing has long been awaited.

Indeed, encouraging the actions of the Financial Conduct Authority required great public advice and some super-campaigns from this newspaper and others.

Previously, insurance companies used double pricing for car and home covers. Faithful customers have been weirdly punished for staying at higher premiums over the years at insurance companies.

Yes, you will be punished, but you will not be rewarded. Did you twist it? yes. But it’s insurance for you. Never trust an insurance company.

Why loyalty penalty? It wasn’t the result these customers always claimed, but the insurance companies knew they were loyal, so if the premium went up at the time of renewal, they hit the eyelids 9 out of 10 times. I had a pretty good idea that there wasn’t.

These loyal customers, many seniors, trusted insurers to do the right thing. How wrong they were. Who says loyalty will be rewarded?

This loyal customer escape has allowed insurance companies to aggressively pursue new businesses. This is the financial standard used by city analysts to determine the success (or other) of an individual company.

Some of the fat profits from loyal policyholders were used by insurance companies to provide discounted price coverage to new customers.

In some cases, it meant that there was a 30-40 percent price difference between the 6-year or 7-year customer’s compensation costs and those who purchased the same plan as the new policyholder.

According to civic counseling, home insurance companies earned 100 percent of their profits from loyalty penalties.

Five years ago, I wrote a series of articles about the high prices that loyal customers are paying for car and home insurance. Readers contacted me hundreds of them to complain that their loyalty was financially abused.

It was a proper campaign that was praised from all sides. A year later, I won the prestigious British Journalism Award. Ironically, the award was sponsored by an insurance company, although it supported the idea of ​​treating all customers fairly.

Then, in September 2018, Citizens’ Counseling filed a “super-complaint” with competition regulators, asking them to investigate a £ 4 billion annual “royalty penalty” for mortgages as a whole, not just insurance. , Savings, mobile and broadband markets.

The CMA agreed with charity concerns and triggered the FCA’s intervention in the insurance market.

… and where we should be now

Beginning this year, insurers have been banned from estimating existing customers a higher home or car insurance premium than they would pay as a new customer.

According to the FCA, the new rules will save loyal customers £ 4.2 billion over the next decade.

Six months after the new regime, evidence that the rule is working shows statistics showing that overall car insurance premiums fell by 5% in the first quarter of this year.

For the record, these were numbers edited by the British Insurance Association (I do not doubt their credibility, but I will point out the source as I thought you might be interested ).

But when I wrote about the new rules in January and last month, I was overwhelmed by communications from policyholders who didn’t think the 2022 insurance market was better than 2021.

Premiums are still rising, at least for them, despite some (but not all) loyal customers.

We’ve also heard from many policyholders who bought (or offered) cheaper insurance in the guise of new customers when it was time to renew their insurance.

This shouldn’t happen in the new insurance world, but regulators have allowed insurers to get out of jail-free cards on this serious issue, so identifying a clear rule violation isn’t possible. It’s virtually impossible.

For example, an insurance company can modify the same coverage quote, depending on how the policy is purchased, such as directly by a broker, a price comparison website, online, or by phone.

This allows some policyholders to get a cheaper quote from their provider than the renewal premium offered by purchasing through a different sales channel than the one they originally used.

Last week we presented the FCA with a correspondence from MoS readers on the issue of car and home cover prices. This included at least 11 examples of potential rule violations. All of this has been (naturally) fiercely contested by the insurance companies involved.

We know that the FCA has considered these cases. We also believe that there are cases where regulatory agencies have taken into account when assessing which companies to focus on in terms of ensuring compliance.

The FCA has told MoS that it is not afraid to impose heavy fines on permanent rule violators. Strong words.

But my suspicion is that the insurance company is currently running a ring around it.As one reader told me:’Insurers are using this [the new rules] To fly my nest. “

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Insurance companies have been forced to prove that they have stopped ripping loyal customers

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