The infamous “loyalty penalty” means existing customers are facing price rises of up to 50% when they try to renew their insurance premiums, and despite plans to ban the practice from next year, companies are hiking prices even higher before it comes into effect.
In this article, we discuss why premiums are on the rise, and how you can reduce the cost of your car, home and pet insurance.
Why are insurance premiums going up?
The Financial Conduct Authority (FCA) said in May this year that the practice of “price walking” – where premiums increase year on year – is to be banned from 1 January 2022.
It found that the average new customer paid £285 per year for car insurance compared with £370 for someone who had been with the company for 5 years or more. For home insurance, new customers paid £165, while after five years their premiums had increased to £287.
Many premiums dipped during the pandemic, such as with car insurance, as people were using their vehicles less while they stayed at home. However, according to research from complaints website Resolver, customers have faced increases of between 10%-50% when they try to renew their insurance products.
If your premium is on the up – or you suspect it will be shortly – there are a number of ways that you can mitigate or avoid the extra cost.
What can you do if your car insurance premium goes up?
Figures from price comparison website Compare The Market show that the average car insurance premium was £629 as of June 2021, the lowest since 2015, but this is likely to change as people return to their cars after lockdown. If you are concerned about the rising cost, you have a couple of options:
- Switch your policy earlier than your renewal date to avoid the hike, but bear in mind that many companies include cancellation fees which have to be paid, which could make the savings redundant. For example, the AA charges a £58 fee for cancelling a car insurance policy, and some insurers charge even more.
- Ensure the details you give your insurers are as accurate as possible to reflect your vehicle’s actual usage. Whereas you may have only driven a few thousand miles per year during 2020 that figure will probably increase as restrictions lift. For example, you may return to driving to the office and start parking your car in the work car park during the day rather than outside your house. All these details could affect the price of your premium.
If you are looking to change your provider, make sure to shop around using comparison sites such as MoneySuperMarket* to ensure you consider all the best deals on the market. For more information on the ins and outs of car insurance premiums, check out our article “How does car insurance work?“.
What can you do if your home insurance premium goes up?
Figures from Compare The Market show the average home insurance premium was £158 at the beginning of 2018, but rose to £177 for the first few months of 2021. Many premiums dipped during the pandemic as people were at home more often and readily available to tackle small faults, such as leakages, on their own. As many were at home over the winter, there was a reduced chance of pipes freezing, and home thefts have also reportedly fallen throughout the lockdown periods.
As we begin to head back into the office, however, insurers will most likely hike their prices again. Prices will continue to be influenced by the trajectory of the pandemic, with lockdown measures playing a huge role in dictating the frequency and severity of home insurance claims, and therefore prices will probably shift as restrictions continue to ease fully and people return to work full-time.
The Association of British Insurers has warned that people who renovated their home during the pandemic should contact their insurer, as the changes could have affected the value of the property, and you may now have to pay out more to cover the structural value of the building than you did before. If you are one of the millions choosing to renovate your home during the lockdowns, visit our article on when you need to tell your insurer about home improvement projects.
For more information on home insurance premiums, visit our article “What is home insurance?” Also, as with all price rises, make sure you shop around to secure the most competitive deal.
What can you do if your pet insurance premium goes up?
Pet insurance premiums rose considerably during the lockdowns as millions more Brits welcomed new pets into their homes and a spate of thefts across the country made headline news. With more pets to insure, and the stakes higher than ever before, premiums soared to reach an average of £817 in 2021 according to the Association of British Insurers.
The cost of pet insurance depends on numerous factors, such as the type of pet insurance policy, the type of pet, the age and breed of pet, and where you live in the UK. For example, a young mixed breed dog on an accident-only policy in the North East of England would have a much cheaper premium than an old pedigree bulldog on a lifetime policy in London, because the chances of having to pay out for the latter are considerably higher.
If you have seen your pet insurance premium rise, or if you suspect that it will shortly, there are a number of ways that you can potentially decrease the cost.
- Get your pet spayed or neutered
- Make sure your pet is microchipped
- Utilise multi-pet discounts if you have more than one pet
- Increase your excess
- Consider a less comprehensive insurance policy
For more advice on pet insurance premiums, head to our article “A complete guide to pet insurance“. If you are looking to switch your insurer, make sure you shop around using comparison websites such as MoneySuperMarket* before making a commitment, or view our handy round-up of the best and cheapest pet insurance in the UK.
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This content was originally published here.