LV customer gets £450 renewal quote, then finds same policy for £310
When Richard Ansell was told two weeks ago of his new car insurance premium for the coming year, he was shocked – a 15% increase despite a nine-year no-claims record.
Although he set up his longstanding policy with LV General Insurance to renew automatically – and the insurer flatly told him the price he was getting was the same as a new customer would pay as required by new city regulations – 72 year old Richard had a sixth sense.
He thought he would just check whether the £450.13 premium he was being asked to pay to insure his Volkswagen CC for another year was the cheapest price LV would offer. What if he tested the new rules and got a quote as a new LV customer? Would it be the same as LV claimed in its renewal notice, or would it be different?
‘Sixth Sense’: Richard Ansell found cheaper cover for his Volkswagen CC
What Richard found was that as a new LV customer buying through the insurer’s website he could get identical cover for around £310, around 20% cheaper than what he had paid last year as a loyal insured LV.
When he challenged LV over the phone about it, he was soon given a revised renewal bonus of £313.53, £136.60 less than he had originally quoted. This was for his existing policy with no terms or conditions changed according to documents he received by email – and seen by The Mail on Sunday.
The insurer did not explain to him why there was such a large difference between the initial renewal price and the revised price.
Richard, a retired technical director of an audio company, is delighted with the result – he’s renewed and saved money at a time when his household bills are rising sharply. But his experience now raises serious questions about the effectiveness of new rules introduced by the city watchdog earlier this year.
These aimed to curb the practice of insurers penalizing loyal policyholders by imposing higher premiums on them than on new customers seeking equivalent coverage. A practice of which Richard almost fell victim, even if it is now doomed to be prohibited.
The Financial Conduct Authority, the regulator responsible for introducing the rules, says its intervention will help loyal customers save £4billion in premiums over the next decade. Yet so far The Mail on Sunday has seen little evidence of savings.
Indeed, based on information provided by readers who have just received renewal notices for the coming year, many loyal customers are being asked to bear double-digit premium increases – in some cases exceeding 60%.
Roger Marchant, from Alloa in Clackmannanshire, has had home insurance with the Nationwide Building Society for the past eight years. Each year when he receives his renewal notice, he first scours the market to make sure he is getting his money’s worth. He has always remained loyal to Nationwide.
But this year he was told the annual premium for his bungalow cover would rise from £407 to £570, a jump of 40 per cent. Naturally, he has now decided to seek cover elsewhere. The 73-year-old retired teacher says he was baffled by the increase, especially given the introduction of the new rules which he said would give loyal customers like him a fairer deal.
“I thought premiums would go down for policyholders who have been loyal to a specific provider,” he says. “But the exact opposite is happening. For retirees like me and my wife, the financial situation is difficult and we have to reduce our expenses. A price increase of 40% is unacceptable.
On Friday, Nationwide insisted it had put measures in place to help reduce premiums for its loyal customers.
Roger Yates, a 75-year-old retired purchasing manager for an engineering company, was asked to pay 62% more when he received his home insurance renewal notice from Co-op Insurance .
He refused, taking out cover with insurer Coverboo instead. Although that still meant he was paying almost 18% more than a year ago for equivalent coverage, he says he is glad to have switched insurers. Roger, who lives in a five-bedroom house in Chipping Campden, Gloucestershire, says his loyalty to Co-op, which dates back more than five years, counted for nothing. He says, “It almost seems like they don’t want my business anymore.
The co-op says it’s sorry Roger wasn’t happy with the renewal quote. But he adds that the rise in premiums was partly the result of a “significant improvement” in policy coverage.
Janet Macdonald, from the Isle of Skye, has been told her annual home cover with NFU Mutual will rise from £413 to £686 next month, an increase of 66%.
“I’ve had a relationship with NFU for over 25 years, but now I’m forced to look for a new home insurer,” says Janet, 80. Her car insurance with NFU is renewed in August and if the price goes up sharply, she will move it too. NFU says Janet’s quote is still cheaper than what she would get as a new business customer.
Richard Ansell believes the regulator has created an environment where loyal customers now believe their insurer will always treat them fairly. But the reality, he says, is totally different.
Richard says: “When I received my initial quote of £450.13 from LV, I could have taken his statement at face value that my cover would cost me no more than that available to a new customer. But something in my blood told me not to.
He adds: “I implore other loyal insurance customers to take a similar stance. Ask your insurer if you think the requested increase is too high. Check to see if you can get cheaper coverage from the same provider that I’ve proven you can. And shop around to see if cheaper coverage is available elsewhere. Ultimately, you alone, not the regulator, will look out for your best financial interests.
LV told the Mail on Sunday that it was “fully FCA compliant”. Regarding Richard Ansell, he said the lower quote he received as a new client via his website was the result of him changing ‘a few things about his policy’ – excluding commuting from his blanket and revealing that he had parking sensors on his VW car.
Yet the policy details Richard received advising him of the revised £313.53 premium are no different to those he got with the original £450.13 renewal notice. The two state that Richard’s coverage includes commuting. Neither document refers to car sensors.
When presented with this information, LV then changed tack. He said the new reduced premium was the result of the rates he uses to “change” prices.
It’s not just insurance’s loyal customers who are being hit by anti-inflationary premium hikes – those who tend to shop every year are also facing price hikes. In recent days, comparison sites Comparethemarket and Confused.com have both reported sharp increases in car premiums.
Comparethemarket says these grew year on year by more than 10% during Confused. com says drivers are facing the biggest increase in four years. Michael Collins, of Dunstable, Bedfordshire, took out motor insurance with LV for two years. It cost him £306.62 in January 2020, rising to £345.06 a year later. He stuck to it, only to be told his bonus for that year would be £443.
Without a driving claim or conviction for around 40 years, he found insurance with Churchill for £400. He still pays a lot more than last year – despite his purchases.
Michael, a 69-year-old former property developer, says: “I’m a good insurance risk, but for some weird reason LV wanted to hit a good client with a 28% price hike.
What the city watchdog had to say
The Mail on Sunday provided the Financial Conduct Authority with details of Richard Ansell’s case (but not the name of the insurer involved).
He said there could be four explanations for the difference between his original renewal quote and the price he finally negotiated after shopping around.
First, he said there was a short grace period – until the 17th of this month – for insurers who could not make the required technical adjustments in time for the January 1 start. LV insisted to The Mail on Sunday that it already complied with the new rules before they came into effect.
Second, the regulator said companies are allowed to change their prices over time, so a renewal quote issued one week would not necessarily be the same as one two or three weeks later.
In Richard’s case, the time difference between the original quote of £450.13 and the revised quote of £313.53 was just four days.
Third, he said the revised premium might not be on a comparable basis. Although LV initially said the new premium reflected changes to Richard’s policy, this is contradicted by the policy details Richard received on January 9 and 13.
Finally, the FCA said the company may be non-compliant. LV insists he is “fully” complying with the rules.
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