British insurers announce they will reward long-term customers with fairer premiums. Previously in insurance, price-drops targeted new customers and left loyal customers facing price-hikes, with this announcement that may finally change.
Cocoon has set out to make it simple for everyone to feel safe. This mission goes far beyond home security, it’s about doing our best to treat everyone fairly. Knowing that the customer help team will look after you and that the products you choose can be trusted, is just as important in home security as it is in insurance.
Announcing customer-first insurance
This announcement is timely. In February Cocoon’s CEO, Sanjay Parekh, called on the ABI (Association of British Insurers) to lead the industry in focussing more on their customers. He said the nature of their relationships with customers should be “centred around prevention more than claims and renewals. Innovating in this way will lead to more engagement and position insurance as a service that’s really trusted.“
The new guidelines from the ABI and BIBA (British Insurance Brokers’ Association) on fair pricing shows that insurance has the potential to lead the way in looking after customers. However, this will not work in isolation. Technological and business innovation is needed too. For example, Cocoon’s partnership with Policy Castle rewards people for being more responsible in looking after their home. By promoting prevention insurers can better justify lowering the cost of long-term customers’ policies by better pricing risk.
Will it make my insurance cheaper?
“Home insurance companies are taking advantage of people’s loyalty,” says Gillian Guy, Chief Executive of Citizens Advice. In a recent report on the so-called loyalty penalty, Citizens Advice found that home insurance customers could end up paying an average of £110 more each year than new customers. The result of insurers fighting for new customers by dropping their prices. Insurance is not alone. This loyalty penalty is also rife in the energy, broadband, mortgage and mobile markets.
Previously, if you didn’t shop around when your insurance came up for renewal, you’d likely end up paying more. This sometimes amounted to hundreds of pounds a year. The hope is that your insurer will now offer you a fair and competitive price at renewal.
However, this is guidance and not regulation. Insurers are free to implement changes in line with their own strategy and goals. The ABI and BIBA say they hope for fast implementation and that the Financial Conduct Authority will consider it in supervising firm’s practices. This sounds optimistic, but they are relying on momentum from an industry known for being slow in implementing change.
If the change works as we hope, you will see your loyalty rewarded in home, motor and travel insurance, with reduced prices for loyal customers. Health and pet insurance are not included in the guidelines.
Is it really a game changer?
“For far too long, those taking steps to protect their homes and loved ones have not been rewarded for doing so,” says Sanjay, CEO at Cocoon. “This may be a small step, but it is the beginning of customers seeing change for the better. Innovation like this, and working with new smart technology, is helping insurance to keep pace with our modern world and become trusted by increasingly savvy customers.”
In an industry often criticised for being slow to adopt new technologies and trends, this is a game changer. It could not only save millions of families in the UK money but also improve the quality of their lives day to day. Afterall, this is the core reason why insurance exists.