Before a crackdown on rip-off renewals, insurers have been accused of cashing in on their loyal customers.
Complaints about renewal hikes have increased by around two-thirds in the past year, according to consumer watchdog Resolver.
Money Mail has also received a glut of readers’ letters in the past week detailing price rises of more than 300 per cent.
Upset: Philip Lock, 71, says his building and contents policy with the Post Office went up from £163.82 to £626.46 this year
In the worst case, one reader says his insurer hiked his home insurance premium from £313 to £1,119 this year.
The alarming spike has raised concerns that insurers are taking advantage of slack rules around policy renewals before restrictions are due to be imposed next year.
James Daley, of campaign group Fairer Finance, says insurers are cashing in now ‘because they think they end of the good old days are just around the corner’.
Last week the Financial Conduct Authority (FCA) said six million insurance policy holders who failed to switch providers were losing £200 every year.
It said home and car insurers are routinely pushing up the premiums of customers unlikely to switch to a new provider. Policy holders could save £1.2 billion a year if they shopped around, the regulator added.
It proposed restrictions on price rises for those renewing their policies, as well as preventing firms from discouraging clients from switching.
But new accounts obtained by Money Mail have raised concerns that insurers are ‘ratcheting up’ prices for loyal customers before they are prevented from doing so.
John Wilson, 49, says his home insurance rose from £312.80 to £1,119.48 this year. His broker was AA Insurance and the quote was provided by Legal & General.
John, a construction worker who lives in St Asaph, North Wales, says he has not made a claim since his home was flooded in 2012.
We were absolutely gobsmacked when we saw the letter,’ he adds. ‘After the flood, our premium went up by £100 and we actually thought, ‘Thank God for that’. But this is such a huge amount and it makes a massive difference to families.
Stung by premium: John Wilson says his home insurance rose from £312.80 to £1,119.48 this year
‘It makes you wonder what is behind it. Are they trying to get rid of customers who could be a risk in the future?’
The father-of-two subsequently switched to Rias insurance, which offered cover for £535 — less than half of what he was offered by his old providers.
An AA spokesman says: ‘The insurers on our panel set the price to meet the expected cost of potential claims. We understand that the property is close to a river (Elwy) and potentially in a high-flood risk area.’
Colin Dale, 80, says Legal & General increased his home insurance from £130 in 2018 to £550 this year.
The antiques dealer, who lives in Abergele, North Wales, says he was told the rise was because of a spike in crime and increased flooding.
But when he looked online he found he could take out a policy for just £88 with Halifax, saving himself a staggering £462.
The father-of-two says he had been with Legal & General for around four years before he received the ‘massive bill’. ‘I rang Legal & General and they gave me this spiel about all the houses in my road that had been broken into and I just thought it was a pack of lies,’ he adds.
‘My house backs into a field and the road is a cul-de-sac. There hasn’t been one burglary down there. They also said the river had been flooded last year.
Well, I wasn’t sure about that but it is five miles away from the house anyway. People are getting exploited all the time, especially the elderly. I think it’s disgusting.’
A Legal & General spokesman says: ‘We do prompt and encourage customers who’ve held longstanding policies to review their insurance to ensure their needs are being met by their current policy and that the renewal price is acceptable.
Different insurers take into account a number of factors and risks when calculating a premium.’
Philip Lock, 71, says his building and contents policy with the Post Office went up from £163.82 to £626.46 this year.
He says the Post Office were unable to tell him why his premium had increased by around 280 per cent but speculated that it could be because of excess claims or a crime spike in his area. Philip says he has not made a claim for nine years.
He lives in the sleepy town of South Molton, North Devon. ‘It’s an incredible amount of money to ask for,’ he says. ‘This letter came through — but I had to look very closely for the precise details.
‘It could be very confusing for some elderly people.’
He has now cancelled the policy and is searching for a better deal.
A Post Office spokesman says: ‘We offered Mr Lock the cheapest price available to us but recognise that the premium had increased significantly.’
James Hewitt, 74, says his car insurance quote with Hastings Direct was increased from £302 to £489 this year. ‘At first I thought they must have been joking,’ he says. ‘I just said it was not acceptable, what can you do for me?’
After several rounds of haggling and finding an alternative quote online for £330, he says Hastings offered him £341.
James says his premium may have gone up because he was forced to claim when someone reversed into his parked car.
A spokesman for Hastings Direct says his claim and inflation resulted in the original increase to his premium.
He adds: ‘When Mr Hewitt contacted us we were able to update details including keeping his vehicle on the drive and not the street and some other personal details, resulting in the revised premium of £341.’
Pauline Pasmore, 81, from Shepperton, Surrey, says her Tesco home insurance premium went up from £253 to £500 this year, despite never having made a claim.
The FCA found last week that pet insurance premiums had gone up since insurers had been forced to publish last year’s quotes on renewal letters
She says: ‘I couldn’t believe it had just doubled. If it had been a £50 increase, I probably would have accepted it because I can’t be bothered switching around. But I draw the line at this.’
She cancelled the policy and found a new one with the Co-op for just £184.28, which included £50 in vouchers to spend in store.
The findings are a further indictment of the insurance loyalty rip-off that Money Mail has long campaigned against.
The FCA also found last week that pet insurance premiums had gone up since insurers had been forced to publish last year’s quotes on renewal letters.
It speculated that insurers were so scared about the likely increase in switching that they pushed up their premiums to compensate.
James Daley says: ‘There will certainly be cases where insurers will be trying to ratchet up prices for loyal customers because they think the end of the good old days are just around the corner.
‘Arguably, that is already contrary to rules brought in last year that say insurers must act in their customers’ best interests. ‘It’s never acceptable to push through price increases of this magnitude — even if you have made a claim.
‘People might be hitting an age threshold and insurers just want them off their books. I don’t think that is a reasonable way to conduct a business. ‘The FCA needs to be braver in taking these companies to task.’
Andrew Hagger, of personal finance website Moneycomms.co.uk, says: ‘It appears that some insurance providers are still taking advantage of customers who fail to shop around. Sadly, I don’t expect to see a shift change in this profit-driven strategy until the regulator forces their hand.’
Huw Evans, director of the Association of British Insurers, says the ‘industry will continue to work constructively with the regulator to ensure that the market works better for customers’.
He adds: ‘It is important that any unintended consequences are carefully considered to ensure that a fair and balanced approach is achieved for all customers.
‘Millions of insurance customers get extremely good deals by shopping around regularly, but we agree that the household and motor insurance markets could work better for consumers who do not shop around at renewal.
‘This is not an issue unique to insurance but we are the only sector to have taken voluntary steps to address the issue and these are bearing fruit.’
Catherine McKinnell MP, interim chairman of the Treasury Committee, says: ‘The FCA should make it mandatory for firms to publish the size of their loyalty penalties to consumers. We’ll keep a close eye on the report when it’s published next year.’
Gareth Shaw, head of money at Which?, says: ‘The regulator must ensure that its proposals to tackle these sharp practices are brought in swiftly and that it is ready to take strong action against firms that continue to rip off consumers simply for renewing their policies.’
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