Insurers under fire for luring customers in and raising premium prices on auto-renew
Homeowners miss out collectively on up to £243m of savings a year as a result of auto-renewing with the same insurer and not shopping around.
The findings from MoneySuperMarket have drawn criticism against insurers who lure customers in with a cheap offer, before subsequently increasing prices on renewal.
Research found insurers typically increased the price of home insurance by £9 per policy per year for those auto-renewing, adding up to what the group called a ‘loyalty tax’ of £39m annually.
Kevin Pratt, consumer affairs expert at MoneySuperMarket, said: “Insurance companies trick loyal customers into sticking with them– but with higher premiums – through confusing renewal letters and notices, whereas new customers are offered great rates to get them through the door. If this happens year on year, loyal customers can end up paying hundreds of pounds more than they need to.
“When it comes to insurance, the message is clear: loyalty doesn’t pay.”
The analysis revealed more than a quarter (26 per cent) of homeowners with buildings and/or contents cover automatically renewed their policy with their existing provider and almost two fifths (39 per cent) saw their premiums rise as a result.
Over half (54 per cent) of those with buildings and/or contents cover chose their current provider because they offered the cheapest deal when they took out the policy.
Had those who auto-renewed shopped around for the best offer they could have saved £59 each or £243m collectively.
Pratt added: “Home insurance premiums fell to a six-year low in April, and prices are now at their lowest since 2010, standing at £109 on average for combined buildings and contents cover. Customers who auto-renew are not benefitting from these competitive prices, though – they are reserved for those switching providers.
“As a nation, we spend over £37 million more than we need to because so many home insurance providers renew their customers’ policies automatically – that’s money we can’t afford to waste. There are savings of up to £59 per household to be made by shopping around and switching providers, rather than letting insurers get away with it.”