There can be no argument that the home insurance industry is engaged in the cynical exploitation of elderly customers, writes Patrick Collinson.
The evidence is overwhelming – just look at the letters below. As is the fact that every company – mutual, cooperative, shareholder, specialist – is in on the game. They have all been seduced by a business model which amounts to offering a teaser rate, then stitching up unsuspecting older customers for years afterwards with absurd premium increases.
When the cry goes up of “How do they get away with it?”, the answer is simple: because they can. There is nothing illegal going on, after all. Every customer has the chance to reject a premium and shop around for a better deal.
But it is fatuous to suggest a 92-year-old with arthritic fingers and macular degeneration should be surfing comparison sites through an iPad app. More importantly, I wonder if these companies really are within the law. Customers are told at renewal that they are, once again, enjoying a “competitive” deal with “great value” insurance.
But when an insurer claims this while charging £700 for a policy that costs £150 somewhere else, it’s a lie. And under the Consumer Protection from Unfair Trading Regulations 2008, deliberate mis-selling like this is a criminal offence.
It’s fatuous to suggest a 92-year-old with arthritic fingers and macular degeneration should be surfing comparison sites
The law states that a commercial practice is a misleading action if it contains false information likely to deceive the average consumer and make them take a transactional decision they would not have taken otherwise.
Specifically, regulation 5 (4) (g) and (h) talk about “the price or the manner in which the price is calculated” and “the existence of a specific price advantage”. Assuming someone is charged £700 for a premium that is £150 elsewhere, and assuming the seller has said it is “competitive”, then arguably a criminal offence has been committed.
Insurers who simply send out a renewal quote on a “take it or leave it” basis are probably within the law. But if they throw in misleading statements about value and price then they are almost certainly crossing the line. The Financial Ombudsman Service should be coming down hard in this area.
The regulators know this whole area is a dog’s dinner. Indeed, the Financial Conduct Authority has proposed remedies such as forcing insurers to include wording in renewal letters which will say something like: “Your quote this year is £200. Last year’s premium was £150. This is £50 more than last year. Shop around for the best deal.”
They should go further. Since March 2014 the energy companies have been forced, by a Conservative government no less, to display on their bills personalised information on the cheapest tariff they offer. Let’s apply this thinking to home insurance with a requirement to tell the householder what they would pay if they were a new customer.
So a bill would say: “Dear Mr Smith, your buildings and contents renewal is £702. If you were a new customer we would charge £146. If you would like to switch to this rate, please call …”.
Pretty soon teaser rates followed by rip-offs would disappear. Real loyalty discounts may even appear – and we’d have a cleaner insurance industry.
By Patrick Collinson, The Guardian