When Richard Ansell received notification two weeks ago of his new car insurance premium for the year ahead, he was shocked – a 15 per cent increase despite a nine-year no-claims record.
Although he had set up his long-standing policy with LV General Insurance to renew automatically – and the insurer categorically 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 to see if 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 his renewal notice, or would it turn out to be different?
‘Sixth sense’: Richard Ansell found cheaper cover for his Volkswagen CC
What Richard discovered was that as a new LV customer buying through the insurer’s website, he could get identical cover for around £310 – some 20 per cent cheaper than what he had paid last year as a loyal LV policyholder.
When he challenged LV over the phone about this, he quickly received a revised renewal premium of £313.53, that is £136.60 cheaper than the one he was first quoted. This was for his existing policy with no terms or conditions changed according to documents he received via email – and seen by The Mail on Sunday.
The insurer would not provide him with an explanation as to why there was such a big discrepancy between the initial renewal price and the revised one.
Richard, a retired technical director for an audio company, is delighted with the outcome – he’s renewed and saved money at a time when his household bills are rising steeply. But his experience now raises serious questions about the effectiveness of new rules introduced by the City watchdog at the beginning of this year.
These were designed to stamp out the practice of insurers penalising loyal policyholders by imposing higher premiums on them than for new customers seeking equivalent cover. A practice which Richard nearly fell victim of, although it is now meant to be banned.
The Financial Conduct Authority, the regulator responsible for introducing the rules, says its intervention will help save loyal customers a combined £4billion in premiums over the next decade. Yet so far The Mail on Sunday has seen little evidence of any savings.
Indeed, based on information supplied by readers who have just received renewal notices for the year ahead, many loyal customers are being asked to stomach double-digit premium increases – in some cases exceeding 60 per cent.
Roger Marchant, from Alloa in Clackmannanshire, has purchased home insurance through Nationwide Building Society for the past eight years. Every year, when he gets his renewal notice, he first scours the market to ensure he is getting value for money. He has always stuck with Nationwide.
But this year, he was told the annual premium for cover on his bungalow would rise from £407 to £570 – a jump of 40 per cent. Understandably, he has now decided to seek cover elsewhere. The 73-yearold retired teacher says he has been left baffled by the increase, especially given the introduction of the new rules that he had been led to believe would give loyal customers like him a fairer deal.
‘I thought premiums would come down for policyholders who have been loyal to a specific provider,’ he says. ‘But the exact opposite is happening. For pensioners like me and my wife, these are tough financial times and we need to cut down on our expenditure. A 40 per cent price hike is unacceptable.’
On Friday, Nationwide insisted it had put in measures to help reduce premiums for its loyal customers.
Roger Yates, a 75-year-old retired procurement manager for an engineering company, was asked to pay 62 per cent more when he received his home insurance renewal notice from Co-op Insurance.
He declined, instead taking out cover with insurer Coverbaloo. Although it still meant him paying nearly 18 per cent more than last year for equivalent cover, he says he is pleased he has jumped insurer. Roger, who lives in a five-bedroom house in Chipping Campden, Gloucestershire, says his loyalty to Co-op, stretching back more than five years, counted for nothing. He says: ‘It almost seems that they no longer wanted my business.’
Co-op says it is sorry that Roger was unhappy with the renewal quote. But it adds that the jump in premium was in part a result of a ‘significant improvement’ in the policy’s 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 per cent.
‘I’ve had a relationship with NFU for more than 25 years, but I am now being forced to look for a new home insurer,’ says 80-year-old Janet. Her car insurance with NFU renews in August and if that jumps sharply in price, she will move that too. NFU says Janet’s quote is still cheaper than 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 got my original quote for £450.13 from LV, I could have accepted at face value its statement 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 adopt a similar stance. Challenge your insurer if you think the increase demanded is too high. Check whether you can get cheaper cover from the same provider as I proved you could. And shop around to see if cheaper cover is available elsewhere. At the end of the day, only you, not the regulator, will look after your best financial interests.’
LV told The Mail on Sunday it was ‘fully compliant with the FCA rules’. With regard to Richard Ansell, it said the lower quote he received as a new customer via its website was a result of him changing ‘a few things on his policy’ – excluding commuting to work from his cover and disclosing that he had parking sensors on his VW car.
Yet the policy details Richard received notifying him of the revised premium of £313.53 are no different to those he got with the original £450.13 renewal notice. Both state Richard’s cover includes commuting to work. Neither documents refer to car sensors.
When presented with this information LV then changed tack. It said the new reduced premium was a result of the rates it uses for pricing ‘changing’.
It is not just loyal insurance customers being hit with inflation-busting premium rises – those who tend to shop around every year are also facing price hikes. In recent days, comparison websites Comparethemarket and Confused.com have both reported steep rises in motor premiums.
Comparethemarket says these have risen year on year by more than 10 per cent while Confused. com says drivers are facing the steepest increase for four years. Michael Collins, from Dunstable, Bedfordshire, has had car insurance with LV for two years. It cost him £306.62 in January 2020, rising to £345.06 just a year later. He stuck with it, only to be told his premium for this year would be £443.
With no claims or driving convictions for some 40 years, he found insurance from Churchill for £400. He is still paying a lot more than last year – despite shopping around.
Michael, a 69-year-old former property developer, says: ‘I’m a good insurance risk, but for some strange reason LV wanted to hit a good customer with a 28 per cent 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 (although not the name of the insurer involved).
It said there could be four explanations for the difference between his original renewal quote and the price he eventually negotiated after shopping around.
First, it said there was a short grace period – to the 17th of this month – for insurers who couldn’t make the required technical adjustments in time for the January 1 start. LV has insisted to The Mail on Sunday it was already compliant with the new rules in advance of them coming into force.
Second, the regulator said firms are allowed to change their pricing 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 £450.13 quote and the revised £313.53 quote was only four days.
Third, it said the revised premium might not be on a like-for-like basis. Although LV originally said the new premium reflected changes to Richard’s policy, this is contradicted by the policy details Richard received on January 9 and January 13.
Finally, the FCA said the firm could be non-compliant. LV insists it is ‘fully’ complying with the rules.
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