When insurances come up for renewal it should now be easy to see if the price is still right or whether some inflation busting rise threatens to severely hit our budget. But just how clear are any annual price changes being spelt out to us? Not always as well as they could be, judging from a sample piece of research that I’ve just carried out.
The background here is that since 1 April 2017 all insurance companies have been ordered to show both the price we will pay to renew a policy and, new and very importantly, the price we’ve been paying up to that point. That means last year’s policy price is also there on the letter allowing you to make an instant direct comparison. It’s widely known that the insurers have often exploited the opportunity to increase annual premiums once we’re customers because they realise that not many of us will take the time to fish out last year’s policy from the drawer and compare it. For the few who have done, there’s usually been quite a shock.
So, as the months have passed since the regulator’s rule change demanding this like-for-like comparison, I’ve been asking friends and family to share their documents and putting the new consumer information to the test. From even a small cross-section of renewal documents it’s possible to conclude that there are now both the good and some ‘could do much better’ insurers out there. The ones I’ve considered are shown below. In all cases there were no claims and no requested changes to the policies, but all went up in price.
It may come as a surprise that in my view, on these findings, it wasn’t a bank’s insurance rise notification style that came out poorest but an insurance product linked to one of our largest insurers, Aviva. This was followed by a car insurance renewal letter from LV, a leading mutual. Although each of the renewal documents stated the price change somewhere in line with the rules it was the prominence given to this that greatly divided them.
It’s likely that the financial regulator expected the price comparison information to be shown both big and bold and so praise here, for presenting it in just that way, to Lloyds Bank Home Insurance. It was the stand out letter design in this research. If you tell everyone about the changes showing the figures in the largest letters on the page and illustrate them in a prominent and eye-catching information box then how could anyone miss it?
In fact it’s exactly what you need if, as in this particular case, Lloyds is asking you to shell out 24% more for home insurance than last year. The price difference is clear and encouragement for people to act and shop around to see if there’s a better deal, the main idea behind bringing in the rule change. But it’s the approach of others that’s potentially more problematic as seen through this admittedly small scale review of their renewal letters.
First let’s take HomeServe/Thames Water. They offer a plumbing and drainage cover policy that is underwritten by Aviva. The insurance is popular, particularly with older homeowners who may find it hard to do their own repairs or may have difficulties finding a plumber or drains expert. In their renewal quote not only had the policy increased by a whopping 54% since a year ago but the old price was tucked away in a display right in the bottom corner of the letter that may well be missed on a first look. Calling HomeServe about this policy nearly always results in a price reduction but you have to wonder just how many people may not have called simply because their renewal letter lacks that large letter, side-by-side, clear comparison enabling view.
Then there’s the car insurance renewal letter from LV. This one contained news of a near 20% increase in premium and was just marginally better than HomeServe in the way it showed this. The problem? Well although last year’s figure was at least quoted in the main text of the customer’s letter there wasn’t any attempt to show it in the same bold print that would’ve matched that of the renewal figure that was seen displayed in an entirely different spot on the page.
Take a look again at the letter images above and see what you think works best.
Let’s remember that consumers were at the heart of the reason for this rule change but can we really feel they’re getting the information presented in the way they expected? Isn’t there a case now for a standard way for all insurers to display their year on year price changes? Are these examples similar, better or worse than what you’ve experienced? I’d be interested to hear what you think and to see your examples.
My view, based on this evidence, is that if insurers can still regularly hike our insurances then some should be thinking much deeper on how to up their game on the way we’re being informed.