Does it pay to be loyal?

When it comes to insurance many of us are creatures of habit...


Providers send out renewal letters and before we know it, we’re locked into another contract – in fact, around 75% of us stick with our existing insurers year after year.

However, an increasing number of consumers are shopping around and checking out the competition before signing up for another 12 months. Comparison websites are facilitating this as they make it much easier to find the cheapest deal.

Faced with a growing desertion rate, insurers have started to fight back: their profit structures rely on the bulk of customers staying put, so the spectre of more and more moving elsewhere after a year is not good news. Consequently, ‘retention’ has become the buzz word and we are seeing various tactics being employed by insurers as they strive to hang on to our business. 

Direct Line for example has recently stated that vandalism claims will no longer affect a customer’s no claims discount (NCD). Given that most other insurers would load your premium for such a claim because you would lose a year’s discount, this is a clever way of deterring those who are victims of vandalism from looking elsewhere. However, while your NCD will be unaffected if you are insured with Direct Line and your car is vandalised, your premium will still go up simply because you have made a claim. And the chances are you could still get a lower premium by taking your business elsewhere. 

Named drivers fall into a similar trap. NCDs are rarely recognised by other insurance companies if you move policies and attempt to fly solo – so drivers often stay where they are.

Another tactic is to offer loyalty discounts. More Than recently announced that its car insurance customers will earn two months’ free cover on renewal as long as they have not made a claim. It is also offering free contents cover to buildings insurance customers as long as they do not make a claim.

Other offers include savings for taking out several policies at once – such as a 10% discount for taking out insurance on a second car.

Certainly these incentives shouldn’t be dismissed but don’t assume your insurer’s ‘goodwill’ is a genuine reward for loyalty – the chances are you’ll find an even better offer from other firms looking to pull in new business.  

For example, the Post Office is offering £50 cashback for new car insurance customers, while Halifax gives a 35% discount to new customers taking out buildings and contents cover.

It can be tempting to stay with your current insurer when your policy is up for renewal, particularly if you shopped around last year and the premium it offered was the best you could find – after all, if the firm was the most competitive then, surely your renewal quote won’t be far off the mark either?

Don’t count on it, and remember loyalty rewards very often flatter to deceive. Insurers know you will probably find a better deal elsewhere but they hope that by offering you an incentive to stick with them, you will go for the easy option.

However, finding out what the competitors have to offer is no longer an onerous job. Our home insurance and car insurance tools compare quotes from more than 50 insurers and insurance brokers. So when your renewal quote lands on the doormat, it is easy to see how it fares against the competition.

Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.

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