The practice costs motorists £1.2bn a year in higher premiums – a cost that has risen 22% in just six months. As a result, drivers are now demanding change with nearly three quarters (73%) wanting more information to help them make a more informed choice at renewal, and 55% wanting the practice of charging existing customers more made illegal.
On average, drivers have been with the same insurer for 2.6 years, while 13% haven’t changed providers for five years or more. While most companies offer loyalty rewards and discounts in return for continued custom, insurers typically reserve the best deals to attract new business.
GoCompare’s research found that only 54% of drivers are aware that they’d get a better deal as a new customer than if they renewed a policy.
While confidence in their ability to change provider prevents 11% of motorists from switching, paying premiums in monthly instalments also creates a huge barrier.
Monthly direct debit payers are 46% more likely to stay with their existing provider than drivers who pay for their cover in a single sum. This is particularly concerning because interest is added to monthly premiums so consumers who pay by instalments, and who are often those who need to keep costs down the most, always pay more than those who make a single payment (typically around 12% more).
Despite regulatory moves to increase transparency in the renewal process, most drivers are missing key information that should be contained in their renewal packs. Only 17% of drivers recalled seeing a statement in their renewal notice advising them to shop around for cover; just 34% said they saw the warning to check that the cover offered was still appropriate for their need, and only 43% saw the previous year’s premium alongside their renewal premium.
Most drivers say they want more renewal information. 32% would like more information through the post, 45% via email and nearly a fifth (19%) by text.
Almost half (47%) think that standard wording in plain English would ensure that renewal letters are consistent and easier to understand, and 40% think that customers should not be penalised for changing their mind after auto-renewing a policy.
Lee Griffin, the CEO and one of the founders of GoCompare, said: “You don’t really expect to hear 73% of people say “I want more information about my insurance policy”, but that is where we have got to now because this is such a big issue, for millions of drivers. Loyal customers deserve to be given clear information at renewal to help them decide whether to stick or switch.
“Auto-renewal means that drivers remain legally insured to drive, without having to engage in the renewal process. But that convenience can come at a very high price. Those who allow their policy to roll-over for another year, can pay hundreds of pounds extra for the privilege. So, when people realise that they’re being penalised for their loyalty, it’s hardly surprising they want the system changed.
“Despite new rules to improve the information given to people and to encourage greater shopping around, not much has changed. Awareness of key renewal information remains low and the documentation currently provided by insurers seems to be doing little to engage millions of motorists in the renewal process.”
Lee Griffin continued: “We have proposed five key changes that could be made now to improve renewals, and millions of drivers agree. However, until unfair loyalty pricing is tackled, the only way motorists can be confident that their loyalty isn’t being penalised is to take action themselves – to switch and save.”
GoCompare’s five-point plan to improve insurance renewals
Extend the cooling-off period for auto-renewals to 28 days from the current 14 days. Insurers should ensure that customers are aware they have been auto-renewed.
Increase communication during the cooling-off period, using a wider range of methods, including email, SMS and push notifications.
Cancellation fees should be limited, if not banned completely, for customers who switch away during the 28 days cooling-off period.
Action should be taken to ensure firms are much more transparent in their dealings with auto-renewing customers. This should apply at the first instance of auto-renewal, but even more so from year two onwards.
The requirement for more transparency should apply to all customer touchpoints – from insurers’ websites to Key Facts, policy wording and other documentation. There should be a standard for transparency and the use of plain English.
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