FCA To Investigate Car Insurance Loyalty Pricing Scandal
Wednesday, 12. June 2019
Following a ‘super complaint’ to the Competitions and Markets Authority by the Citizen’s Advice Bureau (CAB) the FCA announced at the end of last year that it was instigating an investigation into the way that car and home insurance was being sold.
Citizen’s Advice alleges that ‘Loyalty Pricing’ is rife throughout insurance, mortgage, savings and telecoms industries. The process gives customers the impression that they are receiving preferential rates when in fact they are conning us out of £4.1 billion every year according to the CAB.
We’ve probably all been there, I know I was taken in with the wording of my car insurance renewal letter many years ago, something along the lines of ‘Thank you for being a loyal customer, as a result of which we can offer you the special loyalty rate of £xx for the next 12 months. You don’t have to do anything if you wish to continue with us blah blah blah’.
There I was thinking I had a good rate until I tested the market and found that I could save £300 a year – the crooks! And don’t get me started on ‘Loyalty’ phone upgrades! So I for one am all in favour of the FCA investigation. The FCA has already said that it understands the conflict between consumers’ perception of what Loyalty means and the truth – they will be addressing the situation.
Reading the various reports it is far worse than I thought. It would seem that insurance companies assess the likelihood that you will shop around before giving you the new quote. This can see some subjected to ‘price discrimination’, whereby they are charged more than other customers who present the same risk to insurers, and cost no more to provide cover for.
The FCA said it has ‘Concerns that these pricing practices can potentially disadvantage some consumers significantly, in particular, the most vulnerable and least resilient customers’. It seems that older drivers and those with disabilities are less likely to shop around relying on the term ‘Loyalty’ to suggest that they are being treated fairly.
I await the results of the investigation with interest. By Graham Hill
