Guest Comment: Don't lose out for being loyal to your insurer - MSE News

Stop calling it a Loyalty Penalty!!!


I'm not harsh enough to say 'Loyalty' should be full-on replaced with 'Laziness', because there are a number of examples why people don't shop around (anxiety, access to technology, mental capacity etc.).

However, I still think the words 'loyalty penalty' being used all over the place is completely inappropriate, as if these customers are some kind of martyrs. You would almost always be able to stay 'loyal' to your insurance provider without paying as much as the proposed renewal price. It would take one quick phone call. People who describe THEMSELVES as a 'loyal' customer being taken advantage of after auto-renewing for years are even more annoying than regulators using the phrase 'loyal customers' to engender (mostly unwarranted) sympathy for them.


Something more neutral like 'inertia penalty' would be much more appropriate - neither disrespecting people who don't actively switch, nor praising them like it feels calling them 'loyal' does. Of course that wouldn't fulfil the regulators' need to appear all virtuous about helping what is, by and large, a group of lazy people.

Lets just make insurance companies all charge us one consistent flat rate where we can't benefit from competition of a free market.

I don't think people realise this wont make year 2 premium cheaper, It will make year 1 premium more expensive so the renewal hike isn't as large because they lower the rates so much to write a certain number of year 1 new business to fulfil their requirements both regulatory and financially.

Most insurers don't care if you rejoin with them at a lower premium because your a small grain of sand in their beach which they need Year 1 premiums because of Year 5's claims cost ratio etc. Berating insurers who hike renewal premiums wont make them continue charging low discounted first time rates forever it will just make them all charge consistently higher premiums upfront if there's no competition because the regulator wont let them charge higher premiums for renewal customers which in essence will give all the market a free pass knowing their competitors can't undercut them either therefore making them safe to all hike the prices for new business with no competition.

The people who will lose out on this are those who actively shop around at renewal and keep their business to the best bidder and instead reward those who largely can't be bothered to shop around or simply forget (Yes I understand some can't access comparison sites or have a weird view that loyalty still exists in the commercial world) but regardless someone will lose. Everybody can't win.