Loyalty penalties for renewing insurance: three quarters of consumers see price hikes

Around half of consumers faced price hikes of between 10% and 50% to renew insurance premiums in the past six months, research by Resolver has found.

The ‘loyalty penalty’ has been a long-standing frustration for consumers wishing to stay loyal to their insurance providers, only to be charged more than they would be if they were a new customer. However, the Financial Conduct Authority (FCA) has recently announced that it is banning insurers from doing this from next January.

Resolver quizzed more than 1,100 consumers about their experiences concerning their most recent insurance policy renewal in the past six months. For the majority this was their car insurance or home insurance (buildings and contents combined) but other policies in the past six months included pet and travel insurance, as well as separate policies for buildings and contents.

Renewal price hikes

We found that more than three-quarters (78%) received a more expensive quote for their renewal compared to their policy’s previous price – with the most common estimate being an increase of between 10% and 20%. 

The news that ‘loyalty penalty’ practices are being banned will not be a surprise to insurers, as the FCA has been consulting on this issue for a long time. But we were surprised here at Resolver that our survey respondents are telling us that it is still happening – and with such large differentials.

Has your insurer quoted you an increased price to renew your policy? Use Resolver to complain now – it’s free, quick and we pass your case directly to your insurer

More than nine in 10 respondents that got a more expensive renewal quote told us that there was no obvious reason for the price hike. Four in 10 made the effort to contact their provider to negotiate a cheaper price – but despite this a third of those that were given a more expensive renewal quote were not offered a better deal.

 “My policy increased without reason. I went online and got a quote as a new customer – the quote was less and a better, more comprehensive policy – with the same insurer.” 

There was also overwhelming disappointment about not being offered a better price in the first place to reward loyalty with consumers reporting a “constant battle” to get a better price, and frustration around having to “do this every time we want to renew”. Others told us that their research found that not only was a cheaper deal often available elsewhere, but that if they tried to get a quote posing as a new customer from their existing insurer they also got a cutdown price.

Insurance renewal: contact with customers

Our survey showed: 

• One in five consumers contacted their insurer to discuss their renewal because they prefer to speak to someone as part of the process;
• Almost seven in 10 told us their policy was set to renew automatically – though 8% were not aware of this;
• Of the 302 consumers that did not contact their provider about their renewal, 28% had been quoted a more expensive policy renewal price.

We also heard from consumers who had serious difficulties getting hold of their insurer to talk about their renewal or even to cancel the policy – with 2% of those that had been quoted a more expensive renewal price telling us they had tried to cancel but couldn’t get hold of their provider. Others reported it being easy enough to contact their insurer but were frustrated they had to do so, while one told us that although they had cancelled their policy, they were told that if they rang to complain they would get a cheaper quote. 

The experience of auto-renewal also varied, with our survey respondents reporting examples of being notified of their renewal – and their premium price – late in the day. One respondent told us that their renewal documents turned up just two weeks before the renewal date while another reported receiving notification the day before. 

Why should I have to negotiate a cheaper insurance deal?

A common theme from consumers that gave us more details about their renewal experience was the frustration and disappointment they felt around not automatically getting a cheaper renewal price and having to contact the insurer to ‘haggle’ for a better deal. 

Of those that had been quoted a more expensive renewal price, the most common route was to cancel their policy, which 45% of respondents told us they did.

Meanwhile 55% of respondents that had contacted their provider were offered a better price as a result of contacting their insurer. While this didn’t automatically mean they kept the policy, one in 10 said they were ‘pleased’ with the negotiation, but a similar proportion felt that it was ‘unfair’ that they were not offered this price in the first place, while 14% told us they were ‘disappointed’ about this.

“The insurer’s renewal price was high but when I phoned them they immediately gave me a discount. Why didn’t they do that before I rang them?”

Consumers were telling us repeatedly that it was a “shame” that loyalty “wasn’t rewarded” or simply questioning why they had to contact the insurer directly to get a better price rather than simply being offered the best deal in the first place. It was seen as a chore by many to have to research cheaper deals to then haggle with their insurer, rather than simply being able to enjoy at least no price change or even savings to remain with their provider. 

Resolver is calling for insurers to stop ‘loyalty taxing’ their existing customers with increased renewal quotes before they are officially banned from doing so next January, to show that continued custom is valuable – and that they can be trusted to ensure that these customers are getting the fairest deal for them from the start.

Car insurance renewal costs

More than three-quarters (78%) of those that had most recently renewed a car insurance policy in the past six months had initially been quoted a more expensive policy renewal price. Of these, more than one in 10 told us the increase was up to 50% and 4% saw a surge in price of more than 50%

This is despite expectations – and indeed coverage – of car insurance policies actually being reduced due to less mileage driven as a result of lockdowns during the ongoing Covid-19 pandemic. One told us their premium was £300 higher, and we saw examples of hundreds of pounds of savings simply by consumers moving to a different insurer. 

“Less mileage + no claims = higher premium. Moved insurer and saved nearly £200.”

Those with combined buildings and contents insurance policies on their homes were the most likely to see price increases on insurance renewals. More than eight in 10 reported that their renewal quote was more expensive, with 13% telling us that this increase was up to 50%. 

Insurance complaints to Resolver

As our survey shows, even though arguably you shouldn’t have to, it’s worth getting in touch with your insurer if you have been quoted a ridiculous renewal price and Resolver can help raise your case. 

In the past year, Resolver has seen almost 8,000 complaints to insurers, with almost 1,100 specifically concerning renewal, loyalty penalty and pricing issues. Many concerned increased renewal prices and consumers simply wanting an explanation of why this had happened.

Auto-renewal was causing significant problems for those who had turned to Resolver to complain. Worryingly, in our complaints data over the year, we’ve seen examples of people who had attempted to, or had, cancelled their auto-renewal policy, only for the money to have been taken anyway. There were also incidents of people trying to cancel a renewal but being unable to online, or not being able to get through on phones, and wondering how they could get this done. 

We feel insurers should make it as easy as possible for consumers to take action on a service that they make the choice to pay for, especially if they don’t need it anymore or aren’t being rightfully offered a competitive price in the first place. The ‘loyalty penalty’ rules will mean changes in this behaviour, but we are concerned that difficulties in contacting providers to simply cancel a policy will leave consumers out of pocket.

It’s also worth knowing that the new rules imposed by the FCA won’t guarantee that you get the very best price for your insurance, so shopping around is still the best way to ensure you get the right deal for you.