EXISTING CUSTOMERS ARE “FLEECED”
TODAY’S BLOG
EXISTING CUSTOMER PENALTY
If you have ever found yourself screaming at the radio or television as an advert comes on about your existing insurer, finally it seems, your exasperation has been heard. Yes you were right, new customers were getting a better deal than you (on your home and car insurance). Perhaps on your banking or mortgage too.. but let’s park that for another time.
The Financial Conduct Authority (FCA) is bringing an end to the practice of car and home insurers charging loyal customers more than new customers. ‘Price walking’ – commonly known as the ‘loyalty penalty’ – is a pricing practice where existing customers are increasingly charged more, the longer they stay with the same insurer. If you have been a client for a while, you will have heard me mention “the inertia that financial services companies rely upon”. I normally make this comment in relation to someone that has not reviewed their pension or investments for a while, or taken an annuity from their pension company (now that doesnt happen as much these days).
Following a consultation launched in September 2020, the FCA has confirmed this unfair practice will be banned from 1 January 2022 – saving customers an estimated £4.2bn over 10 years. So, if you are a tad cynical like me, then we can look forward to adverts towards Christmas time that focus on the last hurrah of rip-off insurers…. of course I’d also suggest that we may all end up paying more.
NEW CUSTOMER DEALS FOR ALL…
Insurers will have to offer existing customers wanting to renew, a price that is no higher than they would pay as a new customer coming through the same ‘sales channel’. The ‘sales channel’ is just how you reached your insurer, which could be through their website, over the phone, through a comparison site or via a broker. These can all have an effect on the premium you pay and will continue to do so. So, for example, if you’re renewing over the phone, you’ll be offered the same price as a new customer switching to that insurer by phone.
There is of course a but… But this might be a higher premium than a new (or existing) customer taking out a policy online. If you really have the time to call a massive insurance company on the phone, they are likely to charge you more for the pure joy of the experience. As well as the new rules on pricing practices for home and motor insurance, the FCA is also bringing in new rules to make it easier to cancel the automatic renewal of their policy, which should make it easier to shop around. The pricing and auto-renewal changes will come into effect on 1 January 2022.
WANT MY ADVICE?
Well, do not waste your time with comparison websites. These are not whole of market and cheap is not necessarily best. This is insurance. You do not want it, but you need it and if you need to make a claim, you will want it paid out. So, use an insurance broker. Yes they will not be the cheapest option, but their real-life experience is…. priceless. They will get the most suitable arrangement from the market. If you do not have a broker, I can recommend one, who I have used for years – Richard Hiscox at 1StopInsurance. Put his details in your addressbook now or just call or email him to let him know your renewal dates.
Dominic Thomas
Solomons IFA
You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk
GET IN TOUCH
Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT
Email – info@solomonsifa.co.uk
Call – 020 8542 8084
GET IN TOUCH
Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT
Email – info@solomonsifa.co.uk Call – 020 8542 8084