The prime motivation of financial-services companies is “to make money, not friends”, says Becky Barrow in The Sunday Times. This shouldn’t come as any great surprise, but it does come with a problem.
As Barrow points out, personal finance isn’t just about money: it is also – among other things – about “protecting the elderly”, of whom there are an increasing number. That makes the regular fraud and general profit-gouging of the sector, exploiting as it does inertia and incomprehension, a particular irritant.
Barrow points to the example of Peter Rilett, a retired accountant who “spotted that his father was paying over the odds for insurance because he had simply paid the annual renewal premium every year”. It took Rilett a matter of minutes to find another policy “for just a fifth of the price”. Really.
Ripping off the elderly in this way isn’t nice. But it isn’t just the elderly who insurers hope will be driven to overpay by their inability to conquer the admin involved in getting the right price. In the Financial Times, Jonathan Eley writes of his own trying attempts to get good-value car insurance.
His insurer has just rewarded him for an accident-free year by adding £100 to his quote (presumably to pay for their huge advertising campaigns). There he found all the usual problems of comparison sites: commission-paying companies at the top of the lists and endless opt-ins to legal protection breakdown cover and the like.
But beyond these old chestnuts, “insurers have also taken surreptitious charges to a whole new level”. There are new voluntary excesses of up to £300, and high admin fees for cancellations and changes. Two websites even levy “an administration fee for cancelling during the cooling off period”.
The upshot? Every time you get a renewal letter you need to look for a better deal. And you need to look for that deal in the knowledge that the industry is devoted to making it hard to find.
So what might help? How about something really simple, such as persuading insurance firms to write last year’s premium on your renewal statement? That would help with the first bit at least (everyone, however disengaged, would react to a sudden rise). Good news, then, that, according to moneysavingexpert.com, Axa intends to start doing just this.
Will the other big firms follow? Not until the regulator makes them, it seems. Most other insurers suggest that “showing last year’s premiums doesn’t necessarily enable customers to make an informed choice”. That may be partially true (things change over a year). But it is surely hard to deny that it might help a little. As Barrow says, for the insurance companies, it isn’t about making friends.