Charging new customers less than existing customers is exploitative and hurts vulnerable groups such as the elderly but drivers and homeowners are still split on the issue, new consumer research from insurance market experts Consumer Intelligence shows.
The study carried out following the launch of a Financial Conduct Authority investigation into home and car insurance pricing found 50% of customers say it is exploitative. However, 39% say while it is sneaky customers can benefit from the practice.
Nearly two out of five (38%) of customers say they enjoy shopping around and the vast majority (88%) say they compared prices at their last policy renewal for home and car insurance highlighting the success of moves to encourage shopping around.
The most popular possible remedy outlined by the FCA in its consultation in the survey was a ban on charging higher prices for renewals than for new business – 78% of those questioned said it was a good idea.
The least popular remedy was having a specific day or week of the year for insurance renewals to draw national attention to the issue – just 27% rated that as a good idea.
Ian Hughes, Chief Executive of Consumer Intelligence said: “Dual pricing is not a deliberate and calculated attempt to rip off loyal customers. It’s often a by-product of having introductory rates in a market with high customer turnover.
“Insurers would love to get off that merry-go-round. But if they give the same low rates to renewing customers, they’re out of business and if they offer higher prices to everyone, they lose customers as long as others offer cheap introductory rates.
“The regulator has to navigate a balance between encouraging competition and preventing the exploitation of the vulnerable.”