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14th April 2019
Citizens Advice say home insurance companies in the UK make all of their profits from loyal consumers holding policies for 6 years or more
Citizens Advice has found that home insurance companies in the UK make all of their profits-that is over £1bn a year-from loyal consumers holding policies for 6 years or more.
The research also reveals loyal customers are paying an average annual premium of £325 for their 6th year of insurance-almost double that of new customers (£172).
In the last year the data was available(2016) Citizens Advice found 9.3m policies where customers had been loyal to their provider for six years or more. But there were only 6.9m policies where customers switched after a year.
Citizens Advice is particularly concerned that home insurance companies make over half(51%) of their profits from people defined by the market’s regulator as potentially vulnerable.
Its research shows people who are vulnerable due to issues such as poor health are likely to be paying the most for their home insurance. Citizens Advice estimates that 3.75m policies have been held for 11 years or more and over 7 in 10(71%) of these customers are potentially vulnerable.
The charity is calling for the Financial Conduct Authority(FCA) to identify concrete solutions to the loyalty penalty as part of its insurance market study.
Gillian Guy, chief executive of Citizens Advice, comments
“It is appalling that home insurance companies are making all their profit from exploiting loyal customers.
What makes this worse is that vulnerable people are likely to be the most loyal to their provider.
Since we submitted our super-complaint about the loyalty penalty, some companies have rightly promised to treat their customers better. Yet many more are still choosing to make their profits off their most loyal and vulnerable consumers.
The CMA’s response to our super-complaint was clear that regulators must come up with a plan to tackle the loyalty penalty by June. The clock is ticking, the FCA must act quickly to stop this systematic scam.”