JEFF PRESTRIDGE: The insurance market flaw that needs to be fixed NOW

What a bad game insurers are playing with their customers.

Reader Peter Legind, from Saxmundham in Suffolk, contacted me last week about his experiences with Hastings Direct, and it’s all been rather unhelpful.

Peter, a 61-year-old semi-retired landlord, recently received a renewal notice for the buildings and contents insurance on the three-bedroom semi-detached house where he lives with his partner Julia.

Hastings’ renewal amounted to £404, an increase of 27 per cent on the previous year. As crime is not a problem in the local area, Peter thought that perhaps the rather steep price increase was a result of his creeping age (insurers don’t like people over 60) – or (ironically) that Hastings had decided to avoid the upcoming construction of the nearby nuclear reactor Sizewell C would increase local claims.

Sensibly, Peter looked around and found alternative cover at Quotemehappy, an offshoot of Aviva. Although it cost £326, he bought it through a cashback website, which earned him another £36.

A result.

Since the Hastings policy was automatically renewed, he tried to cancel it through the insurer’s website. “Figuring out how to do that was as difficult as finding a Labor politician unwilling to accept a freebie,” he says.

Julia eventually reached Hastings by phone (no easy feat), but was told they shouldn’t have been so hasty in jumping onto Aviva’s lap. Instead of £404, it could now offer a price of £304 – a reduction from the previous year. Julia was perplexed and understandably thought £404 was Hastings’ best price. “No,” it replied, “prices change daily.” How were Julia and Peter supposed to know that?

Although Julia told Hastings to take a proverbial leap, her and Peter’s experience reveals shortcomings in the regulation of insurance renewals.

It certainly cannot be right for an insurer to offer a renewal premium – and then, at the time the customer accepts that premium, not tell the customer that the cover has actually dropped in price.

Customers must receive the lower of the two prices: the price stated in the renewal notice or the price at the time of renewal.

It can’t just be people who call up and threaten to leave – or, as in Peter and Julia’s case, customers who have already decided to take their business elsewhere – who are told they can get a cheaper renewal premium (or could have gotten). .

The financial regulator is now insisting that insurers give existing policyholders the same premium as a new customer would receive for identical cover.

Direct Line is currently issuing £30 million in refunds to customers as a result of breaking this rule.

The regulator should now expand the rule to protect those who are currently denied the benefit of falling prices between receiving a renewal incentive and when they sign up for another year.

• Do you agree? Send me an email at: jeff.prestridge@mailonsunday.co.uk

Bad advice cripples critical illness coverage

CIExpert is the country’s leading auditor of critical illness policy.

Such plans pay out a pre-agreed, tax-free amount if a policyholder suffers a serious health condition, such as a stroke, heart attack or Parkinson’s disease. Most also allow you to insure your children as part of the plan you take out, as well as access to a range of medical-related services.

However, CIExpert believes that such plans are sometimes wrongly advised and wrongly purchased.

It suggests that, based on advice from financial advisors who fear facing compliance issues, people too often buy joint plans when two separate policies would almost always be better for them. If a joint policy is taken out, cover ends if a claim is made, resulting in a full payout – leaving the household without cover. But if both adults in a household have a single policy and one makes a full payment claim, the other’s plan remains intact. If a child’s claim is made, both policies will be paid out instead of the one payment from a joint policy, and the plans will remain in effect.

CIExpert says the average monthly cost of a 25-year joint policy providing £125,000 of cover for a couple both aged 35 with one child and another on the way is around £87 per month. This includes child cover.

But if the same couple were to buy two individual policies, each providing £125,000 of cover, the combined monthly cost would be £93 – just £6 more.

For these additional costs, they would get two coverages, plans tailored to their individual needs (for example, maternity coverage for the mother), two payouts if a child claim is made, and policies that allow them to continue in the event of divorce. the line.

If you have adult children who are thinking of purchasing critical illness coverage, perhaps in conjunction with a home purchase, encourage them to consider purchasing individual policies rather than a joint plan. Broad coverage at an affordable price should always be the financial priority.

A fund manager who rewards loyalty? You don’t get that from a tracker

Stephen Yiu, the manager of the Blue Whale Growth Fund

Fund management groups have done little to acquire customers in recent years, leaving investment platforms to do their marketing for them.

As a result of such a lax, arrogant approach, investors have steadily drifted towards low-cost passive funds that simply follow the stock markets.

So hats off to Blue Whale Capital for taking a stand and waving the flag for good active fund management by deciding to reward its investors for their loyalty.

Subject to regulatory approval, the company will return one percent of annual management fees to investors in its Blue Whale Growth Fund from early next year.

The cut will only kick in if the fund’s value reaches £1 billion (currently that level is around). The fund will then provide a further one percent discount for every £1 billion increase in the fund’s assets.

The savings are returned to investors through a discount on the annual management fees in the fund, effectively increasing its value.

Most investors in this fund pay an annual management fee of 0.75 percent, so a one percent discount will reduce this fee to 0.7425 percent.

Blue Whale Growth was launched in late 2017 with £25 million in seed funding from Peter Hargreaves (the co-founder of Hargreaves Lansdown) and has been an investment success. It is managed by Stephen Yiu and has given initial investors returns of more than 150 percent. By comparison, the average global fund has achieved an 80 percent return over the same period.

Yiu manages a high-conviction portfolio of just 27 stocks with heavy exposure to the United States, particularly technology stocks. The top ten holdings include Meta and Nvidia.

It’s a fund that could do well under President Donald Trump, whose triumph last week was largely due to a promise to drive down inflation and interest rates.

“The job of fund managers is to show investors that we offer something attractive,” Yiu told me. ‘It would be great if other investment houses would follow our initiative.’ Let’s hope they do.