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Insurers act to end renewal rip-offs

The UK's insurance companies say they are planning to give customers a clearer picture when it comes to renewing motor and home policies.

Are you covered sign on noticeboard

Britain's insurers have announced plans that could help customers get a better deal when renewing home and motor policies.

Renewal letters sent to customers towards the end of a policy term would contain not just the price of another year's cover, but also details of the current price being paid.

The move has been proposed by industry trade body the Association of British Insurers (ABI) in a bid to give consumers a clearer picture of how competitive their renewal quote is.

Insurers criticised

Insurers have been criticised by politicians and campaigners for offering cheaper prices to new customers than existing policyholders.

The lack of information at present on renewal letters means that it can be difficult for people to work out whether it is worth sticking with their current provider.

Many do so because they do not realise they would be able to get a cheaper deal elsewhere.

Others do so as a result of the common practice among insurers of automatically renewing cover – and taking payment – if the customer does nothing.

MPs call for action 

Last year, MPs on the Treasury Select Committee wrote to the ABI and the industry regulator the Financial Conduct Authority (FCA) asking for action.

The FCA launched an investigation into how renewals were handled, and promised to reveal its findings at some point in 2014.

The ABI said that it hoped its proposals would address the FCA's concerns.

Huw Evans is the ABI's deputy director general.

He said: "Insurers want to make renewing your insurance policy easier and clearer to understand by reminding you of last year's premium and flagging up introductory discounts.

Discounts for new customers

"Most of us have home insurance or car insurance and it is important we have the information we need when it comes to renewal.

"Our proposal, if adopted by the FCA across the market, would significantly improve transparency for millions of customers. 

"We look forward to discussing it in detail with the FCA."

The ABI also said policy documents for new customers should also make it clear that an introductory discount has been applied which would not be offered upon renewal.

Beat your renewal quote

Gemma Stanbury, head of car insurance at Confused.com, welcomed the ABI's proposals but said consumers would only get a partial idea of whether a quote represented good value.

"While customers will be more aware of what they're paying and how it has changed over the year, this will not be a true reflection of how the whole market has changed in that period.

"For example, customers who receive a renewal quote which shows a lower price than they paid last year may well think they've got the best deal.

"And this is, of course, great news for the customer. 

"But our latest car insurance price index shows that prices have fallen by nearly 15% on average over the past 12 months - that's a saving of £99 for motorists

"Home insurance prices have fallen too. 

"So it is well worth customers comparing prices across many insurers to see if they can beat their renewal quote." 

What do you think?

Do you want to see last year's price on your renewal notice? Would that spur you on to shop around?

We want to hear from you! You can share your views on the message board below. 

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Chris Torney

Chris Torney

Chris is the former personal finance editor at the Daily Express. He's been a journalist for more than 10 years and contributes to a wide range of finance and business titles.Read more from Chris



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