Home and auto insurance prices skyrocket by 20% (or more!)

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New rules requiring insurance companies to stop discriminating against loyal policyholders have sparked a wave of industry-wide price increases, The Mail on Sunday can reveal.

Customers are being hit by anti-inflation premium hikes of more than 20% on home and auto policies renewed this month.

The dramatic increases poke fun at the City watchdog’s boasts that its rules would save loyal customers more than £4billion in premiums over the next ten years.

Fair trade? Tom Desmier’s initial renewal for his Mazda was 33% higher before he applied as a new customer

Evidence gathered by the MoS shows that price hikes are imposed on those who have a long-standing policy with their insurer – the very people the regulator says its rules are designed to protect.

The Financial Conduct Authority had said the so-called loyalty penalty – where long-standing insurance customers are charged more than new ones – would be banned on January 1.

But it seems that rather than raising prices for new customers and lowering them for repeat customers (eliminating the loyalty penalty), it’s long-time customers who are seeing double-digit increases in their premiums.

The increases for those who shop should be felt in the coming weeks.

Seven days ago, the MoS predicted that rule changes would trigger widespread price increases – wiping out the £4billion in savings the regulator says its intervention in the market will lead to.

New data from the online banking platform Trustly confirms our fears. A poll he commissioned says three out of four insurers plan to raise premiums because of FCA rules that require new and existing customers to pay the same price for identical coverage.

One in four insurers, he says, intends to raise prices by a staggering amount – between 61 and 70%.

Cost of coverage: The price of home and auto insurance is rising as new FCA rules say new and existing customers must pay the same price for the same policy

Cost of coverage: The price of home and auto insurance is rising as new FCA rules say new and existing customers must pay the same price for the same policy

Comparison website Comparethemarket also reported that car premiums jumped nearly 7% in the first week of this month, year-on-year. But he warned that premiums would “rise sharply” in the market in the coming weeks.

Readers’ testimonials suggest that large price increases have already been implemented by some insurers.

Readers confirm that insurance companies have demanded steep premium increases in renewal notices sent out in recent weeks.

In most cases, the recipients have been repeat customers with renewals sent out before the new FCA rules came into effect (January 1), but applying to cover renewal this year.

Retired systems analyst Tom Desmier, from Worcester Park in south-west London, received a notice to renew his car insurance on December 27 last year.

Tom, 71, drives a 17-year-old Mazda 2 and has been insured by Liverpool Victoria for over a decade.

Although the policy is branded LV, it is actually administered by Allianz – the German insurer bought LV’s general insurance business in late 2019.

The renewal came to just over £260, 33 per cent more than last year. He then spoke to LV twice to see if he could get the premium reduced.

He succeeded, although he only brought it down to £247, as confirmed in an email dated December 31 (still a 26% increase).

Still not happy, so he decided to see what would happen if he contacted LV via a social media link provided on Trustpilot for unhappy customers.

He was advised to get a quote online as a new customer. On January 2, he received a quote for just under £200, but with reduced mileage and a slightly higher excess (in other words, not an identical policy). A price increase of only 2.2 percent.

LV terminated its existing insurance and the new policy was issued.

“I’m happy where I ended up,” he said. “But it raises the question of whether LV treats new and existing customers equally, as required by the regulator.”

It seems many motorists are still getting better deals on their car insurance if they shop around, rather than sticking with the same provider - despite the new rules

It seems many motorists are still getting better deals on their car insurance if they shop around, rather than sticking with the same provider – despite the new rules

A letter received by Tom from the managing director of LV General Insurance before receiving his renewal notice was adamant: “Upon renewal, we will check the price you would get as a new customer with the same car or home cover from us. . We will make sure your price is equal or higher.

The same letter stated that the renewal price could go up or down depending on factors such as the cost of repairs or if you have any claims.

Tom had made no complaints. LV General Insurance told the MoS it was “fully compliant with FCA changes” and had changed its pricing policy slightly ahead of the new rules.

He also said that any policyholder renewing their cover now would pay no more than a new customer for a similar policy purchased in the same way as their original cover.

He insisted that “most” of his auto and household customers are seeing their renewal prices come down, although he said some faced higher prices due to his “view of certain risks”.

Nothing has changed for a year: I drive the same car and I haven’t had any accidents. So why an initial request for £64 more? It’s not rewarding loyalty

However, Tom is not alone. Eifion Davies is a 56-year-old catering manager at a nursing home for vicars in Lingfield, Surrey.

He received a renewal quote from LV earlier this year indicating the premium on his car cover would increase by almost 25% from February.

Like Tom, he managed to haggle, but it still would have meant a 19% raise. “I’ve been at LV for six years,” he says. “Nothing has changed for a year: I drive the same car and I haven’t had any accidents. So why an initial request for £64 more? It’s not rewarding loyalty.

Eifion has now secured identical cover from Saga at a cheaper premium than last year.

Helen Richards, a 64-year-old radiographer from Rickmansworth in Hertfordshire, has been told her home insurance cover with LV will cost her nearly 50 per cent more if she renews.

On questioning LV, he was told it was because of the new regulations. She will now shop for a new insurer. “So much for loyal customers who get a better deal,” she says.

Rod Coulstock will also seek home insurance after learning his LV coverage will cost 26% more when it renews early next month. Like Tom and Eifion, he tried to convince LV to offer him a better price, but unlike them, he got nowhere.

“I will now look around me,” says Rod, 84, a retired civil servant from Waterlooville in Hampshire. “It’s a shame because our relationship with LV goes back nearly 50 years to when they collected bonuses from an agent knocking on your door.”

Gareth John, a former chief executive of an aerospace company, had home and auto insurance with Direct Line for nine years. He was just told that his coverage will now cost 20% more.

Gareth, who is 66 and lives near Tenby in Dyfed, called Direct Line, to be told the price increase was the result of new rules and there would be no movement on renewal premiums.

He says: “I thought the new regulations were aimed at reducing premiums for loyal customers while removing the price undercutting offered on new customer offers. How wrong I was. He is now trying to find a cheaper supplier.

John Josephs, a retired solicitor from Northampton, has a multi-car policy with Aviva, covering his Skoda Scala and his wife’s Toyota Yaris. In December, before the FCA rules came into force, he received a renewal quote of £950, 10% more than the previous year.

He managed to reduce that to £825, only to shop around to find that Aviva was offering the exact same cover as a new customer for £544. Improving the quality of the cover slightly, he ended up paying £574, 40% less than the original quote.

“Being a loyal customer last year didn’t count for anything,” says John.

Aviva says, “The new rules don’t mean prices won’t always change or drop on renewal.” The FCA told the MoS it would monitor market developments and hold companies to account if they failed to meet its requirements.

The Association of British Insurers says the FCA’s corrective package will likely lead to some consumers paying higher prices when renewing, particularly if their existing policy has received a new business discount.

What our evidence has revealed is that higher prices are demanded of loyal customers.

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