New research from GoCompare Car Insurance has revealed that 50 per cent of drivers believe that it should be illegal for insurance firms to reserve discount rates for new customers.
Typically new customers get the most attractive deals, at the expense of loyal policyholders. New customers get offered the best deals suavely to attract them in with the hope they will leave their cover to auto-renew.
The research also found that 61 per cent of survey participants feel insurers treat their existing customers less favourably by charging those who renew their cover higher prices than new customers.
Insurers don’t tend to reward customers for loyalty and it has been found that motorists who automatically renew their cover could be hit with higher rates.
In fact, the research found that customers shopping-around for cover on GoCompare Car Insurance could save up to £247.29. Despite this, 62 per cent of motorists allowed their car insurance to automatically renew.
The Financial Conduct Authority (FCA) has taken steps to force insurers to improve renewal information to help customers be able to make more informed choices.
Renewal documents are now required to show both the renewal cost as well as the premium paid the previous year.
In addition to this, wording to encourage customers to check the level of cover offered is still appropriate, and a reminder that they can compare prices and levels of cover offered by alternative providers.
Insurers are also required to alert motorists to shop around if they are renewing for the fourth or subsequent time
The FCA regime has been in force since April 2017 but almost half (46 per cent) of drivers remembered seeing last year’s premium alongside their renewal price.
Just a third said the previous year’s premium was clearly shown on their renewal documents.
Only 29 per cent remembered seeing a statement advising them to check the cover level continued to meet their needs, and 22 per cent recall seeing a ‘shopping around’ message.
Lee Griffin, one of the founders of GoCompare, commented: “Car insurance is a market where dual pricing has existed for a long time and where comparison sites have made the practice far more transparent for people who can often see exactly how much their current insurer is discounting for new customers.
“There’s absolutely no good reason why insurers should be able to do this – other than they’ve been able to get away with it. Loyal customers have every right to feel ripped-off.
“The FCA and CMA have taken positive steps to improve the transparency of renewal pricing, encourage customers to shop-around, and to close the gap between premiums for existing and new customers.
“But the onus remains on customers to act to avoid paying more than necessary, rather than on insurers to change their pricing policies.
“It’s high-time the insurance industry reset the balance towards loyal customers.”
Lee Griffin continued: “At renewal, car insurers offer to make life easy by continuing their customers’ cover without them needing to take any action.
“While this helps ensure drivers don’t inadvertently allow their cover to expire, the convenience of auto-renewing usually comes with a hefty price tag.
“Our research shows that most drivers simply allow their car insurance to auto-renew – despite all the warnings of rip-off pricing.
“In lieu of legislation to close the gap between renewal and new business pricing, it’s imperative that people keep shopping-around and switching to avoid getting ripped off.”