The dual pricing of general insurance products is to be investigated by the Financial Conduct Authority (FCA) following claims that loyal customers who stick with the same suppliers across five sectors (mobile, broadband, savings, home insurance and mortgage) are being over-charged an extra £877 per person - a total of £4.1bn a year
This follows a super-complaint to the Competition and Markets Authority (CMA) from charity Citizens Advice saying that loyal customers are being "ripped off" for deals. The CMA said it would now "carefully consider the concerns" that Citizens Advice had raised.
What is dual pricing?
Dual pricing refers to offering a cheap introductory deal on an insurance products and then putting the price up - often significantly - at renewal.
Customers who stay with the same company assume they are getting the most cost-effective deal as a reward for their loyalty – but in many cases they are not.
In the case of home insurance, the BBC reported that one couple in their nineties were paying £1,000 a year too much for their home insurance under the ‘dual pricing’ scheme having been with the same company for six years.
Rules introduced in April 2017 by the FCA require companies to "clearly, accurately and prominently" display a renewal premium and what was paid the year before. A message to encourage customers to shop must also be stipulated. However, 6 months after the new rules, it was found that some insurers were falling foul of the regulations.
As we reported last month, research showed that customers renewing their home insurance with the same insurer after more than a year were likely to pay an average of £75 (38% on the average home insurance premium) more than any new customer.
At UKinsuranceNET, you can rest assured that we constantly monitor our property insurance quotes and renewals to make sure our customers – whether existing or new – all benefit from fairly priced cover*.
*In 2012, a residential property in Aberdeen worth £130k would cost £280 to insure with us. In 2018, the same property, now valued at £150k, would cost £300 to insure.
As you can see from the example above, then over 6 years this shows a maximum increase of just £20 on a £150,000 home in Aberdeen.