Australians want their insurance companies to be upfront with yearly price rises according to a survey commissioned by Consumer Action.
If you own general insurance (for example, insurance for your home, contents or car) you’ll typically buy 12 months of cover at a time. At the end of year, your insurer will write you a letter asking you to sign up for another year, and quoting you a price if you do.
Most of us just sign up for the renewal without thinking too hard about it—we tell ourselves we have a lot more important things to do, shopping around for insurance is hard, insurers are all the same and if we stay with our current provider they’ll reward our loyalty. While the first two excuses might be true, a different insurer may well offer better cover and prices, and loyalty programs won’t necessarily give you a bigger benefit than you can get by shopping around.
The problem is – it’s not always clear when you receive your renewal if the price of your insurance has increased and by how much.
If insurers really do care about loyalty we propose they should state the following on their renewal letters in clear, prominent terms:
- the price of the insurance if the customer renews (they already do this)
- the price you paid last year
- the reason for any change
We believe that if you have this information clearly written on your renewal, it will give you a prompt to question the value of the insurance and shop around. This will help you look for a better deal, but will also make insurers think twice about increasing prices more than they need to.
We’re not the only ones who think this is a good idea. We asked Australians who have insurance if it would be useful to have this information on renewal letters and nearly nine in ten people (86 per cent) said it would be useful or very useful. Fifty-five per cent said they would find it ‘very useful’.
Kevin Newman from Albion in Melbourne’s west nearly allowed his car insurance to renew as per usual but thought to check his bank statement to see what his premium was previously.
“I was surprised to see that my premium had gone up, again, without any mention from my insurance company despite years of loyalty. It would’ve been much easier to compare if my insurance company listed last year’s price. Thankfully I decided to check with a competitor and am now paying over $300 less this year with better benefits.”
The Victorian Government’s Fire Services Levy Monitor made the same recommendation in a 2014 report about improving competition in the home insurance market, and UK consumer group Which? (the equivalent of Australian organisation CHOICE) is campaigning for this change in the United Kingdom.
UK insurers have already acknowledged that this is a sensible idea. The Association of British Insurers has asked the Financial Conduct Authority (FCA, UK’s financial services regulator) to bring in new minimum standards requiring insurers to include last year’s price alongside renewal quotes and the FCA is currently investigating this question. AXA (a global insurance giant with 10 million customers in the UK alone) have already committed to include last year’s premium in insurance renewal quotes.
If insurers in the UK can do this, 86 per cent of the Australians we surveyed want this and the Victorian Fire Services Levy Monitor thinks it will improve competition in insurance markets, we think Australian insurers should commit to making this change. Insurers talk about loyalty on a regular basis – prove your loyalty to us by being upfront with your prices.
We’ll be discussing this with insurers over the coming months. ‘No Claims Discounts’ on car insurance are also not necessarily what they seem. See ASIC’s recent assessment here: http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-040mr-asic-sheds-light-on-no-claims-discount-schemes/  Research conducted by Lonergan Research between 2nd April and 7th April 2015.  Fire Services Levy Monitor (Victoria), Enhancing the consumer experience of home insurance: shining a light into the black box: Discussion paper, July 2014, paragraph 9.1.2. http://www.which.co.uk/campaigns/insurance-renewals/  http://www.which.co.uk/campaigns/insurance-renewals/ABI-insurance-premiums-on-renewal-letters/  http://www.axa.co.uk/about/our-company/axa-group/  http://www.which.co.uk/campaigns/insurance-renewals/AXA-commits-improved-renewal-information/