Households that fail to move their home and car insurance regularly are overcharged by more than £1,400 a decade, according to new research.
An audit of 9,000 motorists and 8,000 homeowners by research agency Consumer Intelligence found that after three years the typical driver was overpaying by £75 and the homeowner by £66.
Loyal customers who stay with their insurer year after year are the ones who lose out most, particularly in home insurance. After nine years, home insurance customers who stay loyal are typically overcharged £127, while drivers are paying £116 too much.
In the first year the differences are small - £37 for home and £63 for car insurance. But they escalate over time and within ten years someone who has failed to switch either type of policy will be paying just over £1,400 more than someone who switched every year.
Elderly homeowners are the biggest victims of insurance overcharging. Last year, Guardian Money highlighted the case of a 97-year-old who lived in a small bungalow just outside London. Her insurer, Lloyds Home Insurance, was charging £1,089.95 for home and contents insurance after she had stayed loyal to the company for years. Yet when her daughter went on to a comparison site to find a cheaper deal, she was offered a premium of just £247.84 – by Lloyds Home Insurance.
New rules introduced last month force insurers to tell buyers at renewal stage what their premium was the year before. The Financial Conduct Authority said that measure alone should save consumers more than £100m, by alerting them to the scale of a premium increase.
But experts say that will not be enough to stop insurers drip-feeding through premium increases and relying on consumer inertia.
Rory Stoves of comparison site uSwitch said: “The challenge is that after your first switch you tend to give yourself a pat on the back, and then leave it for a few years. If the renewal notice shows you it’s just an extra £20 or so, a lot of people might think it’s not worth the bother. But over time you’ll be over paying by hundreds of pounds.”
Stoves said insurers should be ordered to show the price charged when the cover was initially taken out, as well as the previous year’s price.
The Association of British Insurers said the rules on renewal transparency are only just coming into force and will benefit consumers.
A spokesman said: “These will ensure that renewal notices show the current as well as the new premium, and contain a reminder to policyholders to consider shopping around. We actually called for the regulator to introduce these changes across the board so they applied to that all customers, regardless of from who they bought cover.
“Giving these measures time to bed in should ensure that more customers have greater confidence to shop around.”
The ABI added that cheaper policies often come with restricted amounts of cover, and that a change in individual circumstances, such as moving home, may increase the risk and therefore the premium.
Gareth Shaw, money expert at Which?, said that the consumer group had campaigned for the change in the rules forcing greater transparency on insurers. “Unfortunately, insurance is yet another area of personal finance where loyalty generally doesn’t pay. So, just as with savings and energy suppliers, when your insurance is due shopping around or haggling should still be your first step if you want to get the best deal.”
• This article was amended on 8 May 2017 to correct the figure for possible savings from more than £2,000 to more than £1,400 and correct the name of uSwitch spokesperson Rory Stoves
