Home Insurance Renewal Rules

jeeslipp

I've been keeping an eye on news about how the FCA rules on insurance renewals have worked with some interest. I was aware of some of the methods being used by companies to maintain differentiation in margin between different customers, but I had the impression that overall the rules were working. That was until I got my renewal quote for home insurance from More Than a few weeks ago.

The increase seemed quite high from the previous year (about 20%), but I put that down to wider inflation issues and was ready to pay. I wouldn't have done that historically but I thought the new rules protected me! In the end caution got the better of me and I carried out a comparison check (about 3 weeks later), which I was shocked to see was about 25% cheaper, with More Than themselves being over 20% cheaper!

I called their phone line to enquire further, assuming I'd get the old "let me take a look at that for you... looks like I can give you a bit of a discount". After the guy spent 20 minutes lining up every aspect of my online quote request with the renewal, the renewal price remained 20% more expensive than a new customer quote, there was nothing he could do. He told me that if I wanted to pay the lower price I'd have to let my cover lapse and enter into a new policy.

I've since complained to the FOS, who have concluded that they have "seen no evidence" that RSA have manipulated their prices. They have patronisingly explained to me that risk factors can have significant impact on insurance prices (as if actuarial factors in home insurance over 3 weeks reduced the cost of insuring my house by 20%). It appears that they don't require insurers to produce evidence that such price changes are genuinely based on risk factors, a mere absence of evidence of wrongdoing is sufficient. The problem of absence of evidence of course being that it's very easy to find no evidence if you don't do much investigation.

It seems obvious to me that what More Than have figured out is that if they produce all their renewal quotes at a fixed period before the renewal date, they can inflate prices at that advance time to maximise renewal margin. Any new customers requesting comparison quotes at the same number of days ahead will get the same inflated prices, so they'll miss out on a few comparison customers. However they can then reduce margin significantly at dates closer to insurance start date and remain competitive for the majority of new customers.

I understand companies need to make profit and I wasn't necessarily of the opinion that the FCA should be making rules around stuff like this. I think the vast majority of people have been aware of the loyalty premium for a long time. However, to introduce and promote renewal rules as if the problem is now solved, when in reality insurers have such a simple method of maintaining renewal premium as big as 20%, is highly irresponsible. There will be a lot of people who assume (as I almost did) that they don't need to check out their renewal quotes any more and will end up paying a premium as a result.

DullGreyGuy

How did you buy the policy last year? Did you get quotes from comparison sites and then buy online? Telephone them after getting quotes online to negotiate and then buy on the phone? Get a quote directly on the More Th<n website and buy online?

How did you get the quote that was 20% cheaper this year? Through aggregators or direct on their website or?

Firstly, one of the key parts of the rules is that the price can be no more than new customers via the same channel and so if you telephoned last year to buy your renewal quote must be no more expensive than a telephone new business quote but can be more expensive than a quote obtained via their website or an aggregator. 

Secondly, are the policies identical? Your renewal could be on a legacy policy with different terms to a new business quote on the modern policy wording.

Thirdly, premiums dont just consider insurance risk and nor are they required to. Its currently perfectly legal to say that those in "mass exclusive" socioeconomic groups are cash rich, time poor and so less likely to shop around each year so can be quoted at a higher rate... just as long as those people are being quoted the same or more at new business. During the cash cow phase of a business it can be worth while sacrificing new business to maximise return from existing customers (pre rule changes NB impacts were lower as you could discount the first couple of years)

You will always need to check your renewal... for one do you still want the budget version of the policy sold via aggregators or have your needs moved on and you now need the higher quality cover sold via their website and/or telephone etc. 

jeeslipp

My original policy was opened via a comparison site and bought online. The cheaper price I ended up paying this year was found via the same method. Neither More Than or FOS have sited different sales channel as a justification for price differences.

The policies are identical. When I spoke to their call centre operative they went through every single aspect of the new quote to line it up with the renewal and justify the price difference. They concluded that the new price was simply cheaper and that I should let my policy lapse and buy as a new customer.

I'm not sure what your third point is. I understand that insurance companies are free to adjust their margin like any business in a capitalist society. The majority of people who were (and are) being disadvantaged through loyalty aren't cash rich, time poor professionals. They are vulnerable people, such as the increasing elderly population, for whom carrying out online comparisons every year is challenging or impossible.

Before the rules, insurers would charge extra margin on renewal quotes and tighten quotes for new customers to win business. The vulnerable customers who didn't have the facility to check prices would end up paying more, whilst people like myself would switch every year and end up paying far less. This was one way insurers would differentiate between socioeconomic groups, which was deemed unfair, and the new rules were introduced to prevent it.

What the insurers appear to be doing is finding other ways to break up the customer groups so that they can still charge excess margin on renewal quotes relative to new customer quotes. The sales channel method is the example I first heard about, which I see as reasonable. Enforcing equivalent pricing across sales channels would have significant unintended consequences. Online quotes are cheaper than phone quotes and face to face sales in all industries, for good reason.

Differentiating by quote date is entirely different. The fact that my renewal quote was generated 60 days before renewal and I carried out my comparison 3 weeks later, has zero connection to my socioeconomic status. The only thing it reflects is that More Than generate renewal quotes a long time in advance, before most people would carry out a comparison.

On your fourth point, obviously I know that I need to check my policy is still appropriate for me at renewal. But if I decide that it is, the renewal rules should give me the confidence that the renewal price is the same I would pay if I bought as a new customer in the same way as I originally bought the policy. My experience clearly shows that this is not the case.

chassa65

I renewed my MoreThan home insurance last week. A MoneySupermarket comparison gave me a MoreThan quote ~12% less than the renewal price for the same inputs of sum insured etc - I phoned the renewal line and was given a 'loyalty discount' which matched the comparison site price for a renewal of the policy with the same details as last year. So much for no more 'loyalty premium'!

jeeslipp

My complaint to the ombudsman was ultimately rejected. Apparently the point of sale of my various quotes was different, despite the fact that I have only ever purchased insurance online via comparison sites. The ombudsman was unable to tell me what those points of sale were, apparently this is information is private to the insurer. So there is no way for me to understand why the price differences exist or what I could do differently to ensure my renewal prices are not over-inflated every year.

It's pretty clear that the insurers have quickly figured out how to compartmentalise quotes by obscure categories of points of sale, time to contract renewal (etc.). I'd advise everybody to take zero confidence in the FCA's rules and check every renewal price as before.