The first is from Linea Directa, when my car insurance was due to be renewed. The company sent a renewal notice and, as usual, the premium had increased although the value of the car has obviously decreased. I acknowledge that the company will probably have to pay more for car repairs and administration costs each year, but I didn’t think the increase was justified, so I phoned them. I’ve been with Linea Directa for 15 years and phone every year to ask for a reduction, because they put the price up every year. In fact, the woman on the phone knew what I wanted before I’d asked her as my record with them was on her computer screen. Sure enough, a discounted price was offered; in fact, the premium was lower than I’d expected, so I willingly accepted it. I think they’re an efficient company and I want to stay with them, but why don’t they recognise me as a loyal customer and offer me their best price at the outset?
It was a similar situation with my home insurance recently. I insure with Zurich through a broker and the premium was increased on renewal, partly because they raise the level of cover automatically each year. I contacted the broker and asked them to negotiate a lower price. I had a reply within an hour and they offered a much better price, so I was content with it, but frustrated that I had to ask.
Many people don’t question their renewal premiums and pay over the odds for years. Others don’t complain, but just seek another company with an initially competitive price and resign themselves to change often. Indeed, it’s common for insurance companies to offer a lower introductory premium to new customers, whilst not rewarding the loyalty of their existing customers. I think, though, that a majority of policy holders quietly accept increases and the companies are able to make an even larger profit.
In their defence, although insurance companies have a reputation for high premiums and refusing to pay claims, they're not all like that. They also have to deal with policy holders who overstate their losses when making a claim, so do have to check carefully. In general, they provide a necessary service and need to make a profit, like any other business. Their profit margins are usually between 3 - 10% and they make some of their money by investing a small portion of annual premiums in low-risk investments. I do wonder, though, why the companies don’t readily recognise loyalty and aim to keep their customers, rather than having to find new business to replace that which they’ve lost. Surely, it’s easier to make a profit from contented, long-term customers - and I’d like to be one of them.