/ Money

Loyalty to your insurer could cost you dearly

Man with hand on heart

Last month I asked whether loyalty pays when it comes to buying key services, like insurance. We’ve now crunched the numbers to find out whether loyalty really does pay or not…

Rather than being rewarded for sticking with a company, it can often seem like new customers get a much better deal.

It seems that many of you feel like this. For example, Anthony Howe told us:

‘No loyalty does not pay. I cannot think of any example over my life where being a customer for a prolonged period has resulted in a cheaper service than a new customer gets.’

Cheaper home insurance with a different company

We’ve heard from lots of other people disgruntled about the fact that being loyal to a company doesn’t seem to count for much.

Paul and MelanieWhich? members, Paul and Melanie Fisher, were loyal Direct Line customers for 16 years but when they received their renewal letter this year their premium was going to increase by £225 to nearly £1,400.

And when Paul checked on a comparison site he found home insurance quotes starting at just £196. In the end they opted for a policy, offering a similar level of cover, which cost just £287 – a saving of £1,112.

Direct Line told us the premium was a fair reflection of the level of risk for insuring the Fisher’s property. But Paul still described it as unbelievable that they quoted him a price that was so expensive compared to what other insurers would have charged.

Loyalty can cost money on other services

It’s not just insurance – we also looked at lost interest in savings accounts. We found that someone who’d put £10,000 in a top-paying instant access savings account in July 2010 would have lost out on £648 compared to someone who switched to the top-paying account each year. That works out at lost interest of £162 a year.

For energy we looked at someone in the Midlands with medium energy usage (according to Ofgem figures) on a standard variable dual-fuel tariff with an online account and paying by direct debit. Sticking with the dearest of the big six energy suppliers since July 2010 would have cost them £852 more than if they’d switched to the cheapest one-year fixed-rate tariff each year. That works out at £213 a year.

So, there are the numbers. Do you think you’ve been overpaying by sticking with the same provider?

Comments
Member

I guess the top managers of these companies see leaving customers as just part of business and that the thought of doing enough to prevent them from leaving en-mass isn’t worth it. They probably think that offering loss leaders deals to new customers only is a cheaper for them option.

Surely the easiest solution is to make new customers deals illegal, e.g. all offers should be available to all customers.

Member

I had a renewal letter from green flag for car breakdown stating that I had a loyalty discount this year but when I went to there web site I found that I could get it cheaper, so much for staying with the same company they even mislead you into thinking you are getting a good deal.
I rang them up and cancelled my policy then renewed it at the same time and got it cheaper I also asked them to not automatically renew it.

Member
The Dragon says:
6 September 2014

Things don’t seem to be getting any better. Having been asked for a huge unexplained increase in our Home Insurance premium this year we of course shopped for a better quote. Nationwide, one of the ‘Which’ recommended insurers gave us a good quote online and we decided to accept.

Then we noticed that the terms warned that card details would be stored and that the policy would be automatically renewed next year unless we cancelled beforehand. We rang and said we would buy the policy but that we did not want our card details stored, we were buying 12 months of insurance and next years renewal would depend on the quoted fee.

The answer was no, the set up does not allow that. So we will go elsewhere. Are we alone in thinking we ought not to have to commit ourselves to renewal unless we remember to cancel it?

Member

I’m so utterly fed up with insurance shopping every time my car, home, contents, travel, etc insurance is due. Loyalty has no value.

Member

I have been with Santander (and Abbey National before that) for 33 years and until a few years ago the premiums have been reasonable. The only claim I had ever made was for a double-glazed panel, and that was years ago. On enquiring about the high renewal premium I now realise that the cover must have been extended over the years and was offered a substantial reduction for making a few changes. I have now moved to Towergate, where I was able to tailor the cover to meet my needs and will save over £500 compared with the original renewal quotation from Santander. I no longer have unlimited buildings and contents cover but don’t need it.