Readers’ fury as insurers hike premiums by 70% and more

Insurance companies should have their own emoji for when they contact customers with details about their renewal premium: a man in a mask, a triangular hat and a blunderbuss.

Funny? Yes. Extreme? Maybe, but it’s the way many people like Gary Stronge – whose idea it is – feel after just being told their car or home coverage (both in some cases) is going to cost a lot more than it did last year.

Customers are convinced that insurers are trying to force them to accept premium increases that defy logic.

In insurers’ defense, a sharp rise in claims costs – many of which are related to last month’s cold snap – has put pressure on premiums. Last week, Direct Line canceled its dividend to shareholders in response to a wave of claims.

But the renewal premiums demanded by many insurers are staggering. In some cases, customers are facing premium increases of more than 70 percent — even if they haven’t filed a claim in years. Excessive.

Renewal premiums of 30 percent or more are also requested, with the over-60s being the victims. Still outrageous.

Like me, readers who have just received such bad news by text, email or post are spitting feathers. “The extension was a shock,” says Gary, who lives in Enfield, north London. ‘Last year my annual car insurance premium with Sheilas’ Wheels was £197.25. Now they want £312.62, a 58 per cent increase. Who do they think I am? A fool? I just don’t see what has changed in the last 12 months to justify such an increase.”

For the record, Gary, 62, is a retired park ranger, drives a Ford Focus automatic and can’t remember the last time he made a claim on an auto policy. He is stunned and he looks for alternate cover when his existing cover with Sheilas’ Wheels ends.

There are plenty of others in a similar situation. Rob King, a retired feed company distribution coordinator, was told his car insurance with Hastings Direct would rise next month by a “staggering” (Rob’s description) 47 percent.

He had been a loyal customer for over a decade and decided enough was enough. He has his five-year-old BMW XI covered with Churchill Insurance for almost the same price as last year.

“How can these insurers get away with these premium increases?” asks Rob. The regulator should intervene. The increases are incomprehensible.’

Well, the regulator – the Financial Conduct Authority (FCA) – “stepped in” around this time last year. Still, the new rules, designed to ensure customers (like Rob) aren’t penalized for their loyalty, have done nothing to protect policyholders from higher premiums.

The new rules mean that a loyal policyholder of a car or home insurer should pay no more for their cover than someone who comes to the same insurer as a new customer.

For years, insurers have exploited loyal customers by charging them more, knowing most would just take it on the chin and extend. This enabled insurers to search for new customers by dangling dirt-cheap policies in front of those snooping around.

While the FCA insists that “price walking” — the industry term to describe the price discrimination faced by many loyal insurance customers — has been suppressed (although I’m not entirely convinced), many policyholders are worse off than ever.

The premiums are screaming like a perfectly constructed open fire – a mockery of the regulator’s claim that its rules would save loyal policyholders £4 billion over the next ten years.

As Jim Royle of TV classic The Royle Family would say, ‘£4billion my a***’ (think bottoms). “I have been a loyal LV customer for over a decade,” says 78-year-old widower Frank Smith of Southend-on-Sea, Essex. “But when I was told that the coverage of my detached bungalow with a sea view would increase by 35 percent this month, I decided to challenge the insurer.”

When he called, Frank, who until his retirement owned a company specializing in aviation, was short shrifted. “The person on the other end of the line at LV wasn’t interested,” says Frank. ‘They said the premium was fixed: take it or leave it. I canceled my policy.’

Highway robbery: Insurance companies act like 18th century thief Dick Turpin

He’s now got cheaper cover with Aviva, with a few extras screwed on, like accidental damage cover. “Someone needs to take a closer look at those insurance companies,” he adds. “My loyalty has counted for nothing.” At the end of next month, Frank will hear what premium LV will demand if his car policy is renewed.

He will move if the increase affects inflation.

As Frank mentioned, what doesn’t make sense is the size of the premium increases.

Overall inflation is close to 11 percent, while food prices are up just over 13 percent. Increases in insurance premiums of around 10 percent should therefore certainly be the norm. But that is not the case.

For example, the financial research firm Consumer Intelligence says that car insurance premiums are rising by 17.4 percent.

Other inspectors say premium inflation is highest among the over-50s.

Says Rob King, “If my renewal notice had indicated a premium increase of about 10 percent, I would have grudgingly taken it on the chin. But not a 47 percent increase. In that territory of price increases you get the feeling of being ripped off.’

Of course, as Direct Line showed last week, rising claims costs are impacting insurers’ profits — and premiums will be even higher. But some of the premium increases demanded are unjustifiable and borderline age discrimination.

On Friday, Brian Brown, head of insight for banking and general insurance at financial data firm Defaqto, said it is unlikely policyholders will see “any reduction in premiums in the foreseeable future.”

Those shopping around, he warned, should make sure they’re not cutting coverage in pursuit of a lower premium. He added: “Unfortunately, it seems that insurance costs are likely to continue to rise in 2023.”

That might turn out to be the understatement of the year.