Data reveals long-standing customers are paying on average almost double for their household premiums

Home insurers are making their profits entirely from loyalty penalties, according to a report by Citizens Advice released today.

Research claims that customers holding policies for six years or more paid an average premium of £325 compared with £172 for new customers. It also found that there were 9.3m policies held by ’loyal’ customers (six years and more) compared with 6.9m for customers who switched after the first year. 

Citizens Advice, which based its research on 2016 data, said it was “particularly concerned that home insurance companies make over half (51%) of their profits from people defined by the market’s regulator as potentially vulnerable.

Citizens Advice pointed that that 3.75m policies have been held for 11 years or longer, with potentially 71% of these customers classed as ’vulnerable’.

Commenting on the report, the ABI’s director of regulation Hugh Savill said: “Whether a firm makes a profit or not depends on many factors which these figures overlook. However, the insurance industry has already acknowledged that fierce competition between insurers for new business can result in long-standing customers losing out.

”Last year, insurance became the first and only sector to take voluntary, industry-wide action to tackle this issue, with firms committing to review premiums charged to customers who have been with them for more than five years. We always encourage people to shop around at renewal because, as Citizens Advice confirms, you can often get exceptional value this way.”

The industry practice of offering new customers lower premiums than renewal customers has received growing criticism in recent years. While it may have once worked as a way of attracting new customers in the era before aggregators when churn rates were lower, in today’s price-driven market it has resulted in loyal customers being unfairly penalised, according to Citizens Advice.

It launched a super-complaint last year, which coincided with the FCA announcing it would be investigating the practice. Citizens Advice is looking at loyalty penalties across five markets, including insurance. 

The news comes on the same day the FCA released a bombshell report claiming insurers mislead customers through the manufacture, distribution and sale of products.

Source: Citizens Advice
How long consumer has been with companyProportion of policiesEstimate of profit margin (%)Profit on each year £mCumulative profit £m

New customer

(first year)





First renewal

(second year)





Second renewal

(third year)





Third renewal

(fourth year)





Fourth renewal

(fifth year)





Fifth renewal

(sixth year)





Consumers at 6th renewal or higher

(seventh year and higher)