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Loyal customers pay 38% more for staying with their home insurer

Find out how to find a cheaper policy

Loyal customers pay 38% more for staying with their home insurer

Loyal home insurance customers pay over a third more than new customers, a new Which? investigation has found – meaning that renewing your policy with the same insurer could cost you dearly.

On average, people who had been with their insurer for more than a year paid £75 more than new customers for combined policies.

Which? reveals the penalty paid by loyal customers and how you can find a cheap home insurance policy.

  • Our full investigation appears in the September 2018 issue of Which? Money magazine. Take a trial for Which? Money for just £1 for two months today.

Loyal customers see price hikes

You may imagine that insurers would reward loyalty – but our investigation found that the longer you stay with an insurer, the more you’re likely to pay compared with a new customer.

Which? surveyed members of the general public who held a home insurance policy, asking them how long they had been with their provider and how much they’d paid this year.

Of the 5,592 owners of buildings and contents (combined) policies in the survey who told us what they were paying, new customers were being charged an average premium of £195.

By comparison, those who had been with the insurer for one to two years paid an average of £220 – and if they’d stuck around for four to six years, the average was £300.

This graph shows how prices creep up over time.

The 1,674 respondents owning contents-only policies faced a similar, albeit less extreme, trend. New policyholders tended to pay around £100 – but after a year, this jumped to £120. Those who had their policy for four to six years paid £144.

Yet despite this price creep, most people don’t switch at renewal, with 69% of our survey respondents telling us they had been with their insurer for over a year.

Why do loyal customers pay more?

Insurance providers are always on the hunt for new business, and this means they’ll often tempt new customers through the door with discounted premiums.

Loyal customers can find themselves shouldering the burden, paying higher rates that prop up the loss-leading introductory offers.

By switching at renewal, you can benefit from this competitive marketplace.

But some people are less able to compare quotes or find a new policy. Those who are less financially savvy, or less able to shop around on comparison websites, may be especially vulnerable.

Our survey people found that older people are most likely to have the longest-standing policies, with one in six of those aged over 75 staying with the same insurer for more than 10 years.

in May, the Association of British Insurers (the industry trade body) along with the British Insurance Brokers’ Association (BIBA) announced  plans to tackle the issue of ‘excessive’ premiums charged to some policyholders who don’t switch regularly.

A report on the industry’s measures to do this will be published in two years.

How can you find cheaper insurance?

Doing your research when you receive your renewal notice can save you significant sums.

One customer who Which? spoke to was paying a whopping £554 for her home insurance after being with the same insurer for six years. On Compare the Market, the exact same policy was available for new customers for just £335 – a £219 discount.

In this case, she was able to cancel her policy and re-apply to access a new-customer discount. Many insurers will allow customers to do this, although some will block customers from re-applying for a set time period.

You may also be able to haggle if you call up to query your renewal notice. In one case, a customer told Which? that calling the insurer to cancel resulted in the offer of a £100 discount.

Whenever you receive a renewal notice, shop around to see whether you can get a better deal. While some home insurers offer loyalty incentives such as vouchers, only about a fifth offer a no-claims discount, and fewer still offer a discount automatically for remaining loyal – so you may be better off switching every year.

Under new rules introduced in April last year, renewal notices must include both last year’s and this year’s premium. But insurers don’t have to tell you what other customers are paying for the same policy, so shop around.

You can find out more in our guide to finding cheap home insurance. If you’re a Which? member, you can also read our reviews of the best and worst home insurance providers.

Original reporting by Dean Sobers for Which? Money magazine.

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