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Are you overpaying for insurance?

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Profile photo of Mike Naylor Mike Naylor Expert, Which? Money Helpline
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An estimated six million car and home insurance policyholders may be paying too much. Are you one of them?

The FCA has confirmed what many insurance customers have experienced for years: loyal customers get a worse deal compared with those who switch or haggle.

At Which? Money Helpline we regularly talk to people who are angry that the cost of their car or house insurance has increased dramatically over a number of years.

Instead of being rewarded for their loyalty many people feel that they are being taken advantage of.

Shop around

I shop around for my home insurance every year. When my current insurer LV increased my insurance by almost 25% this year, I contacted it for an explanation.

LV told me that it was the best price it could give me and it was not able to justify the increase. However, after shopping around for alternative cover, I decided to stay with LV for another year.

I will of course shop around when I get my renewal letter next year.

Switching home

Mr March from London has insured his house with Prudential for more than 30 years and was surprised when his renewal price for his buildings and contents insurance had actually gone down from £819 to £655 this year.

Worried that he may not have sufficient cover, he phoned the Which? Money Helpline.

After speaking to us, Mr March contacted two of the Which? Recommended home insurers. Mr March decided to switch to John Lewis as it quoted him just £340 for what looks like more comprehensive cover.

He also saved money on his car insurance after haggling with RAC over the cost of his breakdown cover. He was given a discount of £20 and an additional three months of cover for free.

Mr March told us:

‘”I have become increasingly annoyed about being ripped off by my home insurer, car insurer and breakdown provider. Premiums seem to go up every year without any change in my circumstances and any claims.

I was very surprised that I could save so much money so quickly and easily on my house insurance. I would strongly urge everyone not to put up with the seemingly endless increases and switch.

It was very helpful talking to the Money Helpline to discuss the level of cover I need and it gave me the confidence to look for an alternative insurer”

What do you think?

Are insurers taking advantage of customer loyalty and ripping people off who don’t switch?

Or should we share some of the blame for not shopping around and switching insurer, especially given that it’s relatively easy to move to a new insurer?

Will any changes, and a possible ban on companies charging loyal customers more for insurance, mean that people who already switch insurer will end up paying more?

Helping our members

Did you know about our Money Helpline? It’s staffed by financial experts with more than 100 years’ experience in the financial services industry between them.

Members can ask us questions about a range of personal finance subjects, and there are no limits to the number of calls you and your family can make, or the length of time you can spend talking to us.

What we can help you with:
  • Banking
  • Borrowing – credit cards and loans
  • Car, home and travel insurance
  • Equity release
  • Investments
  • Long-term care
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  • Pensions
  • Protection insurance
  • Savings and Isas
  • Tax
  • Wills/probate/trusts

(We do not offer regulated financial advice).

Which? members can call the helpline on 029 2267 0001. The Helpline is open Monday – Friday, 9am – 5pm.

Comments
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Em says:
25 March 2020

Shopping around is all very well – until you run out of options!

I was insured with LV= for many years and enjoyed excellent service and good claims handling in 2006, when a faulty lithium battery exploded, burning a hole an expensive, custom-made Ryalux fitted carpet. LV= offered to replace 30 m2 of carpet throughout the living and dining room, new-for-old (even though that was not a selected policy option), after we rejected various standard options from their preferred supplier CarpetRight, that would have required seams and was simply not of the same quality.

We still have our cars insured with LV= and have been very happy with the premiums and a couple of past claims for minor bodywork repairs.

However, about 6 years ago, LV= hiked our buildings and contents premiums. I shopped around and went with John Lewis, who were offering a 20% discount on first year premiums. Next years, premiums increased by about 10% + loss of initial discount. The year after, premiums increased by an eye-watering 25% and they could not offer a satisfactory explanation, other than to say it was “inflation”.

I moved to Churchill just over 2 years ago. Same story. Low initial premium, then 20% increases for the last two years.

Shopping around again, NFU Mutual have refused to quote. M&S Bank are ridiculously expensive compared to Churchill’s current permium. Because of a minor flood 20 years ago, to an extension still under construction which has since been rectified, LV= are now refusing to quote, even though they acknowledge I was insured with them previously and the flood was not covered by their insurance at the time.

So if you are with a good insurer, it may be best to stick with it, as the OP, Mike Naylor, has done.

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John Ward says:
25 March 2020

Perhaps I should keep quiet. Buildings and contents insurance on our property has been as follows –

2018 . . . £134.76 [renewal]
2019 . . . £149.21 [quotation]
2019 . . . £125.14 [renewal after renegotiating and amending cover]
2020 . . . £132.41 [quotation and probable renewal]

This is with Nationwide for a four-bedroom detached house of standard construction. The 2020 quotation includes £44.14 NCD.The latest increase is 5.8% which, although considerably above the rate of inflation, seems reasonable given the higher claims experience of the last two years due to extreme weather events.

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wavechange says:
25 March 2020

If a supermarket sold the same product to different customers at different prices we would not be impressed, yet well known breakdown recovery companies sell their products to different people at different prices. Several years ago I had about 25 years without a single call out and a company wanted to charge me more than a new customer for renewing my cover. How Which? can make one of the worst offenders a Which? recommended provider makes no sense. I would like to see Which? campaign against these practices in the insurance industry. My solution has been to include breakdown cover in my motor insurance and NFU Mutual has so far not hiked my premium.

Since car and home insurance is customised to suit the individual it is more difficult to see evidence of price hikes for existing customers.

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alfa says:
25 March 2020

There is a lot more to insurance than just getting the cheapest quote.

Many people would find the standard contents cover is too low for their needs. Do an inventory of every room, garage and outbuildings and an approximate replacement cost and it is surprising how much it all adds up to. Don’t forget to look in every drawer, cupboard and box in the attic.

You have to consider the maximum value items are insured for. Electronics may only be insured for £2000 and yours are worth £3000. What is the maximum for any single item? Do you have to specify valuables, and are you happy to have their details stored on computer systems that might get hacked? What about items taken away from home?

Underestimating can invalidate your insurance.

Then there is how you can be reimbursed for a loss. If you opt for new-for-old and replacements are at the discretion of the insurance company, they can replace your belongings with the cheapest available to them. When we had our shed burgled many years ago, most of the replacements were far poorer quality than the items that were stolen. Luckily we could prove the power tools, but we had not kept receipts for many of the other tools.

It is worth taking photos of everything you own so if the worst comes to the worst you have a record of your belongings. It is also worth scanning or photographing receipts as they can get lost or fade.

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John Ward says:
26 March 2020

Good points, Alfa.

One of the traps with insuring contents is that if you have a claim and the insurer considers that you have not purchased sufficient cover they can either repudiate the claim altogether or, more likely, “average” it so that if, say, they believe you have insured for only 60% of the value of all your contents they will only pay out a maximum of 60% of your claim because it is a condition of the insurance that your sum insured covers the full extent of any potential loss. I wouldn’t replace absolutely everything in the event of a total loss so I don’t see why I should insure it. Like most people we have obsolete things, broken or worn-out products, too much furniture, surplus articles, unfashionable clothes that we wouldn’t be seen dead in, and hundreds of books and ephemera that could not be replaced and would not need to be.

I favour insurers that set a high inclusive value [e.g. £1 million] for contents but nonetheless treat a claim in a reasonable and sympathetic way without the need for an argument over the value of individual items. I would not want insurance where the company specified or provided the replacement products but this has been a recent trend.

Many years ago I suffered a burglary and had to deal with a loss adjuster employed by the insurance company; it was a most exhausting and stressful experience that left me extremely dissatisfied.

Pricing insurance cover is an arcane but profitable technique and, as Wavechange says, it is almost impossible to make proper comparisons of value for money as purchasers do not have the perfect knowledge required to make the market work properly.

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