Insurers have been slammed for increasing rates on auto-renewals, amounting to what campaigners call a 'loyalty tax' of £37m.
Research carried out by Moneysupermarket indicates that the average home insurance policy increases by over £9 annually, adding up to £37m per year collectively.
The research revealed that 26% of homeowners with buildings and content cover automatically renewed their policy with their existing insurer and 39% of customers saw their premiums rise as a result.
Of all customers with buildings and/or contents cover, 54% chose their current insurer because they offered the cheapest deal when taking out the policy. The research indicates that customers could see collective savings of £243m per year.
Kevin Pratt, consumer affairs expert at Moneysupermarket, slammed insurers for charging a ‘loyalty tax’.
He said: “Insurance companies trick loyal customers into sticking with them– but with higher premiums – through confusing renewal letters and notices, whereas new customers are offered great rates to get them through the door.
“If this happens year on year, loyal customers can end up paying hundreds of pounds more than they need to. When it comes to insurance, the message is clear: loyalty doesn’t pay.”
In a response to the burgeoning problem of renewal pricing, the Association of British Insurers and the British Insurance Brokers’ Association published a set of industry guidelines to help tackle the issue of dual pricing.
The research also showed that 20% of home insurance customers couldn’t be bothered to shop around while 17% said that loyalty stopped them from shopping around.
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