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Car Insurance: Is loyalty always rewarded?

With premiums up by 17% on last year, insuring your car can be costly. The insurers say it's not their fault but Watchdog has discovered some of the biggest companies can offer existing customers cheaper deals... they just don't like telling them... Riz Lateef reports.

Video - Car Insurance: Is loyalty always rewarded?

Has your renewal quote just landed on the mat? If so, you probably need a lie down on the bed. But what do you do after recovering from the shock? Curse the insurer, but resign yourself to paying up? That's what most of us do - but that'd be wrong. In fact, before agreeing to renew, we should check online because there may well be much cheaper deals to be had.

And believe it or not, some of those deals are available from your very own provider - the same company who's renewal quote has gone through the roof.

Andrew Wilkins received his renewal notice from More Th>n in February they wanted to charge him over £750. He decided he would do some of his own research on a price comparison website to get alternative quotes. The result? Andrew found that he could get his insurance cheaper, in fact one company quoted him just £512 for a whole years cover and the name of that company? More Th>n.

It turns out that the price that Andrew saw on the price comparison site with his own insurer was £250 less than they were asking Andrew to pay. With More Th>n claiming in their adverts that they guarantee to beat rival companies renewal deals, it would appear that in Andrew's case they were under cutting themselves. Andrew called More Th>n who were unable to offer an explanation but did offer him the insurance at the lower price.

Like other drivers who've contacted Watchdog, Andrew almost paid a penalty for being loyal to his insurer. The company never contacted him about the deal on offer to new customers - he only discovered it by accident. According to one recent report, around 8million people simply let their car insurance auto-renew, rather than look for a better deal.

Daniel Turner had been a loyal customer of Admiral, using them since 2010 to insure his two cars, at a cost of over £1000. But when he received his renewal letter earlier this year the premium had rocketed to £2000. Daniel searched online for cheaper quotes where to his amazement he found Admiral offering him the same insurance for just £961, over a £1000 less than his renewal quote. Admiral offered to price match Daniel's deal but again offered no explanation for their price ramp.

Other drivers who've contacted us aren't only shocked that they can get cheaper deals from their own provider simply by posing as new customers - they're baffled by some of the excuses given. Mark Marvao has been with for four years and his renewal has just increased by £100. But when he went to the company website and signed up as a new customer, he discovered he could get a much better deal. So how did Swiftcover explain it? When Mark phoned the company their rep on the phone didn't give a clear answer, but after consulting with his supervisor did tell Mark they could cancel his renewal and set up the new quote at the cheaper price.

Company Responses

An ABI spokesperson said:

Motor insurers are committed to giving all customers the best possible insurance deal. They value their existing policyholders and will look to attract new customers. Motor insurance is highly competitive and evidence shows that nearly three-quarters of customers shop around between insurers to get the best deal. When shopping around it is important to compare the cover between policies and not just the cost. For example, does a cheaper quote come with a higher policy excess (the first part of each claim that you pay yourself) and does your existing insurer offer any additional benefits, such as discounts on other insurances, that are of value to you. So the golden rule is to make sure that you buy the cover that best suits your needs.

A MoreThan spokesperson said:

Over the last few years, a number of factors have contributed to the rise in motor premiums such as bodily injury claims, uninsured driving and fraud. We fully acknowledge that the rising costs are a major issue and as a responsible insurer we are doing everything we can to tackle the causes behind them.

With reference to the difference in costs, we price according to the risk we're asked to insure and where some customers will see an increase in premium, others will see no impact at all. Like all insurance companies, we will offer competitive premiums to attract new customers.

Our customers are very important to us. We offer existing customers a range of special discounts and offers through MORE4ME, which we have negotiated exclusively for them. Customers who purchase multiple products are also able to take advantage of additional discounts.

An Admiral spokesperson said:

A renewal rate can be higher for a customer for a number of reasons, in this case it was an extreme increase and we are sorry that Mr Turner received this. The money a customer pays is based on detailed information we look at as a company and currently our new business and renewal customers are assessed independently. We are aware this has caused some problems and have been working on a change to our systems that will help resolve this problem.

The premium we charge each customer is calculated from a series of detailed statistical models which study the past claims experience for similar customers. The differences in premium we charge for different levels of any rating variable are a true reflection of the risk we take on as an insurance company.

In the customer's case, the difference between the renewal quote and new customer quote is because the process of setting a price is carried out independently between our new business customers compared to our renewal customers.

This means these two different groups of customers receive several independent rates based on their circumstances; as a result renewal rates differ to new business rates. Sometimes renewal rates will be lower than new business, and sometimes, as in this instance, they will be higher.

The renewal rate can be higher when a policyholder falls into several categories where, based on our past claims experience for similar customers, renewal terms are less favourable than those for new business. In a small proportion of cases, several small increases can come together to make a more significant rise in the overall premium. Having looked at the case in detail we can see this was the situation for Mr Turner.

The renewal documents any customer receives quote the renewal premium for the coming period of cover and ask the customer to contact us if they are not happy with the price and want to cancel the policy in order to take out cover elsewhere. As noted in your letter, when the customer called us we reviewed their case and arranged for the price of their cheaper internet quote to be applied to the existing Admiral policy.

Sarah Vaughan, Motor Director of Swiftcover, said:

Retaining customers is very important to us and we aim to provide policy holders with the most accurate renewal prices for their car insurance. On average premiums have increased across the industry which is due to a number of factors including uninsured drivers, fraud and personal injury claims.

It is important that customers looking for quotes from alternative sources use exactly the same details from their original quote, as this will have an impact on the price. Our pricing rates are continually refreshed; however we try to ensure consistency of prices at new business and renewal.

As a company we are putting a lot of investment into improving our customer retention so that we can offer loyal customers the best price possible. We are constantly looking at our process to improve our customers experience and ensure customers receive the most accurate quotes at the time of purchase. As part of this, we have recently changed a few elements of our question set for new business customers which will allow us to offer more accurate quotes. We will be rolling this out to renewal customers too, but in the meantime we are happy to deal with individual customers on a case by case basis.