New research published today suggests home insurance companies are overcharging up to 13 million households in the UK simply for renewing their existing policy.
Polling conducted on behalf of Citizens Advice found that older people are especially vulnerable to these additional costs.
40% of people over 65 have had their home insurance policy for over 5 years, which means they could be paying 70% more than a new customer would for the same policy. For someone with the cheapest policy for buildings and contents insurance, this could be an extra £110 a year, on average.
Research from Citizens Advice confirms charging loyal customers more than new customers is a market-wide practice, with companies often making large hikes in premiums when customers renew their policies.
Almost one third of the entire home insurance market could potentially be paying 70% more than a new customer for the same policy.
Earlier this year, the Financial Conduct Authority set new rules to help consumers by making it a requirement for companies to explicitly inform customers what their past year’s premium was at renewal. However, many home insurance providers did not fully comply with the regulations.
Our research shows vulnerable groups such as people with mental health problems, those on low incomes and disabled people were less likely to engage with the home insurance market when their policy was up for renewal.
Home insurance policies and premiums are already complex for consumers to understand. Only half of home insurance customers surveyed were confident they could identify unfair charges in their premium.
Citizens Advice is calling on the Financial Conduct Authority and insurance providers to work together to identify and protect vulnerable consumers from the loyalty penalty.
Gillian Guy, Chief Executive of Citizens Advice, said:
“Home insurance companies are taking advantage of people’s loyalty, and it’s older people who are suffering the most.
“The Financial Conduct Authority must stop home insurance providers overcharging customers. Vulnerable customers are the hardest hit and must be protected from this unfair practice.”