Why do premiums go up for loyal customers?
Hands up if you like paying insurance. No? I didn’t think so. You might stick by them for years, diligently renewing your policy, but what do you get for all your loyalty? Zilch.
Unless you make a claim you’d think your insurance premium would drop after a year. Partly because you’ve proven to be less of a risk and partly to reward your loyalty. But in reality this isn’t what happens. Instead, your premium goes up!
We recently had an email about this from a frustrated Which? Convo reader. He found it absurd that companies continuingly increased their premiums the longer he was with them.
A cynical industry
I think the insurance industry is pretty cynical. It’s mainly interested in attracting new business, snaffling new custom from the competition by offering particularly attractive premiums. And it can afford to be generous, because it relies on existing policyholders accepting their renewal quote, no questions asked.
When Which? reported on the cost of car insurance recently, we found that the average renewal premium rose by £12. Of course, the insurers will tell you that times are tough and their margins are slim, or that the cost of reviewing and maintaining policies is expensive. Or even that rising premiums are down to an increasing number of cars on the road (which are surely insured, so that one doesn’t wash).
Oh, and then there’s the general poor state of the economy, which makes life difficult for them since the stock market – where they invest your cash – isn’t performing as well as they’d like.
Vote with your feet
But that’s all rubbish. They’re on to a good thing and they know it. According to our research, a third of drivers accepted their insurance premium because they couldn’t be bothered to shop around.
That’s the real reason your renewal quote is so disappointing. And this makes for a very good reason to spend a little time looking around for a better deal. It may be their game, but we all play it too, so vote with your feet and move on.
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