Inflation is a wicked economic ailment that wreaks havoc with our household finances. So it’s right that the Government wants it treated, however painful the short-term surgery is.
So far, the inflation-treatment is proving troublesome as food bills rise and energy costs remain infuriatingly high. It is why further increases in interest rates are coming our way, courtesy of the Bank of England. Increases the Bank hopes will reduce demand in the economy and dampen the inflation flames.
Although the war in Ukraine (triggering rises in wholesale energy prices) and a tight labour market (pushing up wages) are the big inflation drivers, opportunistic companies are also exacerbating the symptoms that the Bank is desperate to eradicate.
In the world of financial services, no sector is using the cloak of inflation to push up prices more brazenly than insurers. Whether it is car, home or pets insurance, many providers are demanding astronomical increases in premiums when customers’ policies come up for renewal.
They are hikes that suggest the UK is experiencing runaway inflation (hyper-inflation) rather than the 7.9 per cent rate recorded in the 12 months to June. Industry analyst Consumer Intelligence says motor premium increases are running at a record-breaking 34 per cent, while consultant Pearson Ham says average home insurance premiums are rising at 21 per cent.
Persistent: Leonie Yeates won a lower renewal price after telling her insurer she found cheaper car cover
Pearson Ham warns that, for the time being at least, ‘the trend of rising premiums will continue’.
Of course, insurers need to raise premiums in response to the rising cost of meeting claims. For example, if it costs more to repair a claimant’s car than it did a year ago (a result of higher labour and material costs), it is justifiable to up premiums. But by an average of 34 per cent or 21 per cent? Come on insurers, you are taking us for a ride. Averages, of course, conceal the mega increases that some insurers have tried to charge policyholders – often elderly, loyal customers. In nearly all cases, there is no justification – and none given.
An insurer voluntarily explaining a 50 per cent premium increase to a customer? Perish the thought.
To illustrate this point, let me give an example of an insurer trying it on with a customer (I have plenty of others up my sleeve). Leonie Yeates recently received the renewal notice to insure her 13-year-old Hyundai. For the record, she is a dear friend. Leonie, a copywriter from Wokingham, Berkshire, is 66. In the past year, she has had no accidents, scrapes or bumps, or speeding tickets. Most of her driving is local – motorways are not her thing. She is a conservative driver with a no-claims discount going back six years.
Last year, Churchill charged her £186.95 for cover. This time, it wanted £288.04, an increase of 50 per cent. She was singularly unimpressed – the only things that had changed were the car’s age and her own.
Aware of the virtues of shopping around, she hit the price comparison websites.
Weirdly, at moneysupermarket.com, one of its recommendations was Churchill at a cost of just over £250. The policy was slightly better than her existing one because it had a lower voluntary excess. Au fait with the regulations introduced last year by the Financial Conduct Authority (FCA) requiring insurers to offer existing customers the same prices as new ones, she contacted Churchill. A sensible plan given her existing cover was renewing at a price above that for a better policy from the same company. At the very least, this is against the spirit of the FCA’s new rules.
Conversing online with the insurer, she said: ‘You’ve quoted me over £288 for a renewal. On a comparison site, Churchill offers new customers £250.08. Existing customers should get the same price.’
For the next 45 minutes, she played message ping-pong with an operative dealing with multiple customers.
Increasingly frustrated, she messaged: ‘I’m about to click on cancelling the insurance. I can’t spend any more time on this.
‘Would you like me to stop the renewal or want to match the price for you?’ came back the response.
‘If you can agree to match the price of £250.08, I will take it,’ replied Leonie.
‘I have successfully matched the price for the renewal for you,’ , said the operative. ‘Thank you,’ said a relieved Leonie.
An increase of 34 per cent instead of 50 per cent and a saving on her original renewal premium of £30.36. Rather painful to achieve, but a result nonetheless.
A few points to make on this episode.
First, every customer who receives a renewal quote higher than the premium they paid in the previous year should not accept it straightaway.
If you have access to a computer, use a price comparison website to see whether lower priced cover is available elsewhere. Also, as Leonie did, see if your existing cover is available from your insurer at a better price as a new customer.
If cheaper cover can be obtained from another provider, take it. If your existing provider is offering your policy to new customers at a lower price, contact them and ask them to match it – quoting the FCA rules.
Although you might get involved in a game of brinkmanship, most insurers will honour the new business price for fear of incurring the regulator’s wrath.
If you don’t have access to a computer, see if a friendly neighbour can help. Or (and this might not be possible) ring your insurer and ask for a discount.
Second, adhering to the FCA rules is not the only issue that Churchill needs to address. Its administration is creaky. Since agreeing to the new renewal price, Leonie has had one confirmation letter – and another saying her cover is automatically renewing at £280.44.
Enough to send anyone barking mad. Maybe that’s the point of Churchill’s nodding dog with his famous catchphrase: ‘Ohh, yes!’
Saga petition
More than 600 people have signed a petition calling for over-50s company Saga to honour a commitment made to customers in the 1990s to provide them with lifetime copies of its splendid monthly magazine for a one-off fee.
The more readers who sign this online petition, the greater the chance that Saga will reverse its crass decision to tear up its deal. You can sign at: https://chng.it/9rFvgR2f. Thank you.
Keep investing
Investing is for long-term investors, not speculators.
So don’t be distracted by experts who say the UK stock market is attractive (Fidelity’s Alex Wright) and others who take the opposite view, arguing that it could stay cheap for a long time to come (Lindsell Train’s Nick Train).
Don’t buy or sell on the back of what they say, however good they are as investment managers.
Just keep investing, preferably month by month, and via a broad portfolio of UK and global funds. Do that and you won’t go far wrong.
Investors put off by jargon
According to banking group Lloyds, half of adults are put off investing by financial jargon.
It’s a barrier to investing that fund managers (especially) and online platforms need to tackle as a priority.
After all, it’s in their best interests.
More customers and more business. Remove the barricades NOW.
