Neil McNicholas: Rewards for loyalty just a fairy tale to greedy insurance companies

Loyalty can be expensive when it comes to paying for insurance policies.
Loyalty can be expensive when it comes to paying for insurance policies.
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Once upon a time, in a land of insurance far, far away, there lived a boy called Premium and no matter how old he became he never got any bigger because, when he was born, a good fairy called Loyalty had cast a spell on him. And because he liked being small this worked out well for him and he was very happy.

There was just one condition to the spell and that was that he had to avoid having any mishaps or accidents because if he did the spell would be broken, but he was always very careful and so Premium never grew any bigger.

But then one day along came an evil fairly called Ripoff and he had the power to cancel all previous spells and suddenly Premium started to grow year by year and soon became so big that he was no longer any fun to play with. So all of his friends left him and he lived unhappily ever after. The end.

A recent Which? survey found that loyal home insurance customers can find themselves paying a £75 a year “loyalty penalty” for sticking with the same provider. Customers who had been with the same insurer for over 20 years were paying almost twice the amount that new customers paid. But, then, why are we surprised?

I’m old enough to remember a time when the insurance premium for my car would go down automatically every year that I renewed my policy – possibly also because I had made no claims on my insurance. The practice was its own reward. It now has a name: no claims bonus, which is actually not a bonus at all because premiums increase in cost every year anyway even if you don’t make a claim.

The insurance companies’ explanation is that we are paying for other people’s accidents, but why should we? If companies choose to insure people with a history of accidents, surely it is they who should bear the cost of taking on that additional risk, not make the rest of us pay?

But also, what happened to rewarding loyalty? In my obvious folly, I’m still taken aback when my renewal notice arrives and the premium they are charging is as high or higher as the previous year and I have done nothing to deserve it other than remaining with that company if I subsequently choose to do so.

Are they really not interested in attracting custom, or are they confident of attracting more new customers with special offers than the existing customers they may lose on a matter of principle (a word they wouldn’t even know how to spell)?

A spokesperson for the Association of British Insurers (ABI) said: “We recognise that the insurance market is not working as well as it should for many long-standing customers”. Never! Perish the thought!

How long did it take them to work that out – or, rather, how long has it been since they hoped their customers wouldn’t come to the same conclusion?

Now the lights has dawned, how long will it take them to change their systems and start rewarding loyalty?

The other thing that I find really galling is that if you contact insurers (and the same with cable and satellite television providers) to question the renewal cost they are charging, the response is typically “Oh well, let’s see what we can do to reduce that” – and they usually do!

The obvious question is that if they can, then why don’t they offer existing customers that better deal in the first place?

Again, obviously, the number who will pay without querying the amount, far outweighs the “deals” they will have to offer to customers who do challenge what they are being asked to pay.

Just watch the adverts on television for our cable and satellite and broadband providers, in particular the small print at the bottom of the screen. Whatever deals they are offering will invariably be for “new customers only”.

What, then, you may ask, is the point of being an existing, even a long-term, customer? Clearly the thing to do is to keep swapping companies (and the same with gas and electricity providers) so as to keep on being a new customer.

However, apart from being a pain to do, doesn’t that constant process create an administrative nightmare? Maybe it does, and maybe that’s why so many of these organisations have no longer got the time or the available staff to reply to emails and phone calls and letters, and why the term “customer service” is as much of a fairy story as the one at the start of this column.

Neil McNicholas is a parish priest in Yarm.