Inflation is a vicious economic problem that wreaks havoc on our family finances. So the government is right to want the short-term surgery to be painful.
So far, the treatment of inflation has been worrisome, with food bills on the rise and energy costs at an all-time high. That’s why more interest rates are coming, courtesy of the Bank of England. It boosts bank confidence, reduces economic demand and dampens inflation.
Although the war in Ukraine (mass energy price hikes) and labor market tightening (wage hikes) are the biggest causes of inflation, opportunistic companies are exacerbating the symptoms the bank is desperate to destroy.
In the world of financial services, there is no sector that uses the cloak of inflation to raise prices more boldly than insurers.
When it comes to renewing auto, home or pet insurance, customers’ policies, many providers demand astronomical increases.
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How can this money help?
The increases suggest the UK is experiencing runaway inflation (higher inflation) than the 7.9 per cent rate recorded in the 12 months to June.
Industry analyst Consumer Intelligence said motor premium increases were running at a record 34 per cent, while consultant Pearson Hamm said average home insurance premiums were up 21 per cent.
Pearson Hamm warns that ‘the upward trend in premiums will continue’, at least for the time being.
Of course, insurers will have to respond to the rising cost of claims settlement. For example, if it costs the claimant’s car more to repair than it did a year ago (due to higher labor and material costs), then it is appropriate to increase the premium. But an average of 34 percent or 21 percent?
Come on insurers, they’re taking us for a car. It hides the mega-increase some insurers have tried to charge policyholders – often elderly loyal customers. In almost all cases there is no proof – and none is given.
When an insurer voluntarily explains a 50 percent premium increase to a customer? Kill the thought.
To illustrate this point, let me give an example of an insurer trying with a client (I have many others at my disposal). Leonie Yeates recently received a renewal notice to insure her 13-year-old Hyundai.
For the record, she is a dear friend. Leonie, 66, lives in Wokingham, Berkshire. She has had no accidents, scrapes or crashes or speeding tickets in the past year. Most of the driving is local – highways are not her thing. She is a conservative driver with no claims six years ago.
Last year Churchill charged her £186.95 for cover. This time, he wanted £288.04, a 50 per cent increase. She wasn’t particularly impressed – the only things that had changed were the age of the car and her own.
Realizing the virtues of shopping around, she hit up price comparison websites.
Amazingly, on moneysupermarket.com, one of the deals was a Churchill for over £250. The policy was slightly better than hers because it had a lower voluntary surplus.
She spoke to Churchill about rules introduced by the Financial Conduct Authority (FCA) last year requiring insurers to offer existing customers the same prices as new ones.
A reasonable plan with current coverage was being renewed at a higher rate for a better policy from the same company. At the very least, this is against the spirit of the FCA’s new rules.
When she spoke to the insurer online, she said, ‘You quoted me over £288 for renewal. On comparison site Churchill offers new customers £250.08. Existing customers should get the same price.’
For the next 45 minutes, she played message ping-pong with one operation with several customers.
She was very upset: ‘I’m going to click cancel insurance. I cannot spend more time on this.
‘Do you want me to stop the renewal or do you want to match the price?’ The reply came back.
‘If you agree to match the price at £250.08, I’ll take it,’ replied Leonie.
‘I have successfully fixed the cost of refurbishing for you,’ said the operator. ‘Thank you,’ said a relieved Leonie.
A 34 per cent increase instead of 50 per cent and a saving on the first renewal premium of £30.36. It is very difficult to succeed, but the result.
A few points to make on this part.
First, every customer who receives a renewal price higher than the premium they paid last year should not receive it immediately.
If you have access to a computer, use a price comparison website to see if you can find cheaper coverage elsewhere. Also, as Leonie did, see if your existing coverage is available from your insurer at a better rate as a new customer.
If cheaper coverage is available from another provider, take it. If your existing carrier offers your policy at a lower rate to new customers, contact them and ask them to match it – citing FCA rules.
Although they may engage in a game of obfuscation, most insurers fear the regulator’s wrath and comply with the new business rates.
If you don’t have a computer, see if a friendly neighbor can help. Or (and this may be impossible) call your insurer and ask for a discount.
Second, compliance with FCA regulations is not the only issue Churchill needs to address. The administration is brutal. After agreeing to the new renewal price, Leonie had a confirmation letter – and another saying her cover was renewing straight away for £280.44.
It’s enough to send someone screaming. Perhaps Churchill’s dog was shaking his head and saying ‘Oh, yes!’
Saga petition
More than 600 people have signed a petition calling on the over-50s company Saga to honor the promises it made to customers in the 1990s.
The more readers who sign this online petition, the more likely it is that Saga will reverse the high-profile decision to scrap the deal. You can sign this: https://chng.it/9rFvgR2f. Thank you.
Keep investing
Investing is for long-term investors, not speculators.
So don’t be fooled by experts who say the UK stock market is attractive (Fidelity’s Alex Wright) and others who take the opposite view, it may stay cheap for a long time (Linzel Train’s Nick Train).
Don’t buy or sell on the back of what they say, no matter how good they are as investment managers.
Keep investing, preferably monthly, and through a broad portfolio of UK and international funds. Do that and you won’t go far wrong.
Investors are turned off by the jargon.
According to banking group Lloyds, almost half of adults put off investing in financial terms.
Fund managers (in particular) and online platforms should be prioritized as a barrier to investing.
After all, it is for their benefit.
More customers and more business. Remove the covers now.
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