It’s taken years of campaigning by Money Mail and other consumer champions, but finally the wheels are in motion to end what is quite possibly the greatest rip-off of them all.
As we reveal here, some plucky customers are winning payouts when they complain to the ombudsman that their car or home insurance has been hiked unfairly and without good reason.
Today, I urge anyone who hasn’t switched their cover for several years to 1) shop around immediately because I can almost guarantee you are being ripped off; 2) once you’ve got a cheap quote, write to your old insurer and the ombudsman (use our template letter) demanding a refund.
some plucky customers are winning payouts when they complain to the ombudsman that their car or home insurance has been hiked unfairly and without good reason
Insurers hate being cast as the villains, but they’ve built a fundamentally flawed market.
To attract new customers, they have to offer such low premiums in the first year that they hardly make a profit.
To then make you a profitable customer, the firm must crank up prices almost every year when you renew.
The proof they’re up to no good is that when you kick up a fuss, they usually knock so much off the cost that you’re back where you started.
The rip-off most severely affects people who’ve been with the same firm for five years or more — typically the old and vulnerable without access to the internet.
The scandal has become so acute that yesterday even the industry trade body admitted insurers must act more fairly.
Don’t be fooled by this last-ditch attempt to play the Good Samaritan. Behind the scenes, the City watchdog is sniffing away and insurers are running scared.
The most obvious fix would be to ban different prices for new and existing customers. But that would only penalise savvy drivers and homeowners who always shop around, and discourage competition, as it’ll mean first-year premiums start far higher.
So my sources say the Financial Conduct Authority may instead look at setting a limit on the gap between the prices for new and existing customers. It’s a flicker of light at the end of the tunnel.
Post Office ogres
Of all the companies Money Mail readers have highlighted for penalising the elderly, the Post Office deserves the most flak. Its bosses know full well that a vast chunk of the 3.8 million over-65s who don’t have access to the internet are its customers.
Yet they still think it’s acceptable to pay savers who want an easy-access account 1.05 per cent if they use the internet and just 0.75 per cent if they pop into a branch.
That 0.3 percentage point difference is worth £135 a year to a pensioner with the average £45,000 balance in savings. That’s not an insignificant sum in these days of painfully low interest rates.
Post Office bigwigs are exploiting the good name of a British institution — and their luck in having such a captive market on its doorstep. They should hang their heads in shame.
No wonder banks and building societies like to make mortgages seem complicated when they’re pocketing billions from customers who unwittingly sign up for the wrong deal or are unfairly blocked from shopping around.
It’s utterly bizarre that couples such as Anne and Carl Winter, featured on page 41, are being told they can’t afford a cheaper mortgage.
That defies logic — and the City regulator must get a handle on this problem right away, because its own idiotic lending rules are to blame.
It should tell lenders to allow any mortgage customer to shop around if they haven’t missed a repayment; crack down on the use of fees to baffle customers into selecting the wrong deal; and make firms tell customers up front which deals they’ll qualify for.
One thing we can all do is make a note of when our mortgage deals come to an end. You can reserve a new one six months before your loan expires.
Making sure you don’t overshoot the maturity date — and roll onto your lender’s expensive standard deal — can make you £1,000 better off, the FCA says.
That’s not bad for 30 seconds of scribbling in your diary!