Insurance automatic renewal is a con

[Rob S]

Very true. The renewal for both my motorcycles came through 4 weeks ago and I was very pleased to see that it had actually gone down by £30 compared to last year. But I did quote on the companies online system and it came in at £35 lower than my renewal. I phoned them up and queried this and they stated the online quote was for new business. I asked them if they would match it and they after enquiring with the underwriters confirmed that they would. So my premium which had been £211 the year before was reduced to £145. Not bad for 2 1200cc motorcycles:D

[Zamzara]

I don't really have a problem with auto-renewal as long as it's transparent and easy to cancel. The 2008 Unfair Trading regs now require that no arduous barrier is imposed to effect cancellation.

 

I also had a problem with Quinn taking unauthorised payment after 'not receiving' my notice to not renew. They ignored a complaint, so my bank reversed the payment without the need for court.

[PriorityOne]

I've just cancelled the renewal of my car insurance next month... but have gone with the same company again on an online deal instead. Although I made a few changes to the policy (cancelled legal assistance; reduced mileage), it still came out £190 cheaper overall !!

 

Interesting to note that policies are also cheaper when a car is parked on a driveway... rather than in a locked garage. Strange, but true. Needless to say, that was another change I made.

 

[fedupwithbritain]

Automatic insurance renewal is indeed a massive con.

The companies conveniently only provide a telephone number to call if you don't want to renew.

They then go ahead and renew your insurance even if you call them to say you don't want to renew.

They will say that they never received your call.

Obviously, they don't provide an email address or, heaven forbid it, an address for you write to, so that you have evidence that you did not want to renew.

The practice is so odious that even supposedly reputable companies are entering into blatant deception.

I avoid automatic renewals like the plague since my past experience.

So, in taking out my home insurance, I take the precaution of checking the payment methods available in order to ensure that I won't be ensnared.

Indeed, Churchill say that they don't do auto-renewal unless you request it and they list a telephone number that you have to call to request auto-renewal.

But, you might have guessed, once you've entered all your details, including credit card details obviously, and come to the final accept button, they put up the message that your credit card details will be stored for purposes of automatically renewing your policy the following year!!!!!!!!

This practice of automatic renewal is blatant deception and fraud.

The government really ought to legislate against it.

None of the companies offering renewable services like insurance will accept payment by cheque anymore. They insist on getting a card number off you in one way or another. They are so clever and determined to ensnare you in automated renewal that when they offer payment by annual direct debit, you have to make a deposit with them by credit card or debit card!

It is causing endless stress and anxiety amongst those citizens who are careful with their money - admittedly the minority in this country now.

The credit card companies don't want to know about any transactions made against your will.

So, you end up having to fight a battle over email as nobody provides addresses to which you can write anymore.

I guess we will have to wait until the practice takes off in Europe and then the Europeans will legislate against it, because their citizens have the balls to protest against this kind of thing.

Actually, it is probably already illegal to hold credit card details on computer in this country unless specific permission is given by the customer. Don't the politicians go on and on about the Data Protection Act? But, what is done in practice. Nothing.

So, what can be done?

These automatic renewals can't be avoided nowadays.

You can't rely on phoning the company's number to tell them you don't want to renew, because my experience is that they just ignore your call.

You can tell your credit card company that you have lost your card before the date on which you know the company concerned will attempt to steal your money. But, you can only do this so many times.

In my experience, it is pointless writing to credit card companies to tell them not to accept transactions from a certain company.

Where you have to call a number to cancel, you don't have much choice but to prepare yourself for a lengthy campaign of protest, which the companies know most people don't have time for.

The clincher is recording the telephone call and putting that call onto computer so that it can be emailed to the parties that you are protesting to.

I'd be interested if anyone knows how to record telephone calls made via Skype and how you can get calls to 0800 numbers to appear on your telephone bill.

Obviously, if enough people got up off their lazy, benefit-or-public-sector-provided arses and were made to know the value of money again in this country then this whole thing could be protested against and the government would have to do something.

[simpson_eh]

kwikfit do auto renewal i just cancelled it my end after last payment was taken, shortly received a letter from them saying they had been informed by my bank that i cancelled the dd and were not able to auto renew and i would no longer be insured once the date had passed.

 

thing that annoyed me the most is that they want an extra£100 to renew it but on there website it was coming in the same, i couldnt get the new insurance due to still being insured by them for another 12 days so i went elsewhere

[oliver76]

It might be an idea for a sticky to list the companies and brokers that engage in this odious practice.

 

Swinton Insurance, auto renewed even though I told them twice on the phone that I did not want to renew. Now they have charged me £88 to cancel a policy I did not want. I rang to complain but they really don't care in branch and there head office complaints department are useless.

[Michael Browne]

That's the trouble with telephoning, you have no documentary evidence. Nevertheless I'd write to Swinton, demanding a refund, giving them 14 days and then issue a county court claim.

[hightail]

I have been with the same company for a few years. I phone them as soon as I get the renewal notice and renegotiate the premium. I pay in full upfront and make it clear that this is a one time payment and they may not auto renew when I give them my debit card details. I then follow this up with an email stating the same and take a screenshot - cheaper than a recorded delivery letter but still probably proof enough if necessary. It's worked for me so far, in fact I get very good deals, much better than anything on comparison sites.

[elwood660]

I do appreciate the protection that is offered by automatic renewal, but this is just a smoke screen and counter argument for what any intelligent person can see as a con to extort monies form unsuspecting individuals. Quite simply all autpomatic renewals are instigated at a much higher premium than the previous year, even though details have not changed and no claim is made, this is purly in the interest of insurance companies and is realy tantermount to legalised theft. Also why should I have to go to the cancallations department to try and get a better deal,by your very statment your are addmiting that insurance companies are trying to rip people off a policy should have a price and not be open to negotiation. It is not surprising that so many people make false and exragerated claims as they feel what is good for goose is good for the gander. It costs a lot to gain a customer so when will an insurance company realise that it is likley to make more profit in the long run by retaining their good customers by not trying it on at renewal times. Growing your customer base is growing your business and present as an industry you revolve your customers. Dumb Dumb Dumb.

[scott808]

Yeah I had this same thing with the AA break down, of course to gain membership with any of them now you have to tick the box saying you agree with automatic renewal and your card being charged even in your absence say! Try to cancel just a DD also and you have to watch for them trying to start up a new one without ever asking you!

 

I paid by card one year cancelled the card before the renewal found a letter one morning telling me it had renewed, phoned them told I was going to have to pay £15 to cancel and that the membership, was £30 more than if I went with the RAC. Later after I realised they hadn't got the money a new DD popped up and had to cancel it before they took the money that way!! Just a mistake!? And fifteen pounds for two minutes of some low paid employees button pushing time to get your money back! Their going to get their buttons pushed one day!!!

Edited February 6, 2011 by scott808

[Mallrat83]

I work for one of the big insurance brokers in the UK, ill leave you guess who. Automatic renewals are there for the customers benefit as much as the companies. Sure, I am under no illusion that the insurance companies offer this method in hope that some people (like myself) are lazy and cant be bothered chasing round quotes so as long as the price seems decent, I just go ahead with it. They keep the business and I could be paying a bit more than what I could find elsewhere, which leads me to my next point... It does is there to benefit the customers aswell. There are two types of people when it comes to policyholders. You have the ones who care more for the customer service they receive from the company, and you have the people that care about the price. This automatic renewal benefits the ones who care about the service because aslong as the quote is reasonable they do not have to do anything further. It also benefits Mr Smith, who hasn't received his renewal invitation because of postal delays and isnt aware that the car was up for renewal so he continues to drive his vehicle unaware hte policy is due to renew. by automatically renewing, this means that mr smith wont get stopped for driving without insurance so therefore wont get an in10, and when he does receive the renewal document he can then contact the insurance company and cancel if he is not happy with the premium and pay a time on risk charge based upon the time he has had on cover. afteral its alot cheaper to pay a time on risk charge than it is to pay the loading on a new policy an in10 would bring, and also the fine incured for getting an in10.

I understand from the perspective of the people who go for the cheapest quote, so they feel they are being trapped into this. However, ive dealt with alot of email complaints from people who advise that they are not happy with the renewal premium and have taken the insurance elsewhere and want no further contact because there premium elsewhere was £200 cheaper... Well ok, but there was enough commision in your policy to have discounted your premium cheaper than what you obtained elsewhere. Ok, bye bye.

I understand that it is annoying that if you dont want to renew with that insurer that you have to contact them, but surely it is best to go back to the insurance company and haggle and ask is the renewal quote the best they can offer. Afteral they could bring it cheaper htan what you can obtain elsewhere afteral the broker gets paid commission so therefore can discount off that commission. As someone stated, u only get if you ask!

[Michael Browne]

However, ive dealt with alot of email complaints from people who advise that they are not happy with the renewal premium and have taken the insurance elsewhere and want no further contact because there premium elsewhere was £200 cheaper... Well ok, but there was enough commision in your policy to have discounted your premium cheaper than what you obtained elsewhere. Ok, bye bye.

 

So effectively you are saying that you would often be able to match or even beat a quote from elsewhere but only if an existing customer contacts you and complains. Why not just offer a reasonable renewal premium in the first place instead of taking the p***?

 

Strikes me as being a very odd concept of customer service.

[Mwynci]

I don't think mallrat is speaking in the defence, but offering advice.

 

Insurers do it often not to make a basic profit, as we know profit margins per premium are non existant, it's just the ability to pull in large amounts of money, which is pretty exclusive to the UK, in that sense we don't have it bad.

There are very few business models out there that price match to this extent, often it's the individual taking the hit on their commision.

 

Power to the complainers, if you don't ask you don't get.

[Wulfyn]

There is a lot of good information here about auto-renewals (and about renewals in general), but there is also a lot of misconceptions. Overall it's a pretty balanced affair - there are some benefits to policyholders but there also some benefits to insurance companies. However even though overall it may be balanced that doesn't mean that there are not lots of winners and losers. What is a con is that not enough people really understand how the process works, because sadly companies don't like to reveal things like the truth.

 

Here's how it works:

 

Full Cycle

This is the term that is used to describe auto-renewing insurance. If you are purchasing a product from a high street broker you may see the letters FC in the insurance product, and that's what FC stands for. Back before computer technology became good (and for the insurance industry that means about 15 years later than you'd think) people who got their insurance had to go through the hassle of making a trip to their high street broker or calling up a number of insurance companies and restating all of their information to get a new quote. It wasn't possible to just say "hey, can I just run my existing details through the system again please?" because once the year (cycle) was up on that policy that was it.

 

So the insurance companies had a bright idea. They said "hey you know all these people that cannot understand why they have to restate all of their information for their next year, why don't we keep their details and rerun it again?". The advantages were plain and simple on both sides. Customers got a better level of service, and the existing insurer got the first crack at the whip. Also in those times there wasn't a lot of insurance products on the market, and the pricing was pretty stable, which meant that the cheapest insurer one year was very likely to be the cheapest the next year.

 

 

Broker led vs Insurer led renewals

There are actually 2 types of renewing. If you purchase your insurance directly from an insurer then you are technically that insurer's customer. That means that when it comes around to renewal time the insurer can rerun your risk and provide you with a quote. If you call them up to say you want it then they can (maybe) get it processed on their system. All well and good!

 

However if you went through certain brokers (usually national insurers such as banks and supermarkets etc) then that broker would consider you as one of their customers. They would run your risk against a panel of insurance products, find the one that they can earn the most commission on - I mean cheapest, and sell it to you. But when it came time to renew the broker didn't want to risk losing the customer by having the insurer you insured with have the only bite at the apple, so they re-ran it against their panel and sent you that one through the door. The problem is that even if you, the customer, responded promptly, the broker would still have to tell the insurer.

 

Now when a policy runs out it 'lapses'. A policy that has lapsed cannot be reinstated. Also insurance cannot be backdated - that is you cannot purchase it on the 7th of the month for cover that started on the first. In fact if your broker told an insurer that you had cover that started on the first on the 7th then it would be illegal for the insurer to start cover from that date. So the problem is this - if the broker did not get the information to the insurer in time then the customer would be without cover for a certain period, and that is bad news for everyone involved. In fact even now if an insurer is not told that a policy has been cancelled they will auto-renew it for a few days (for free) on the off chance that it may be a broker system problem in getting the message across that it has been renewed.

 

 

 

Renew if you don't reply

Of course there is also the added 'bonus' to the insurer / broker that you might simply be too lazy to look elsewhere, so by putting in a function saying "all you have to do is nothing" then they will make more sales. After all if the price looks about right to you the customer then you may not be bothered to shop around. Originally shopping around tended not to be much good anyway due to the low volatility of prices, but these days with new products hitting the markets all the time and the prevalence of aggregators and panels there can be quite a lot of fluctuation from year to year. Additionally the range of products on the market is much wider, so you tend to find very low quality products undercutting renewal premiums by offering less.

 

 

Anti-Loyalty

Insurance companies have learnt long ago that generally customers that stick with you tend to make you more money, and are thus more desirable. For that reason commission rates tend to be much lower after the first year, and often insurers will give loyalty discounts in order to try and retain the business. However this has been under attack in the past few years due to 2 (flawed, in my opinion) beliefs. The first is that as a renewal customer is better than a new business customer the best thing to do is to target the customers that would be loyal to another company by promising to match their premium in the first year ("we will match your renewal") - this is flawed because they then go onto their own rating system in the second year where they lose the business as the premium goes mental. The second is that if you retain half your customers then the best way to increase the number of people that remain is to increase the number you start with, by heavily discounting the new business premium - effectively selling at a loss in the first year. This is flawed because again premiums go mental in the renewal period.

 

All this means that the sector as a whole becomes profitless. Customers jump around getting those deals that are only available to new business customers. Many will even offer a new business premium at a lower amount than their renewal, encoraging people to hop to the new business price even though they stick with the same company. Falling premiums reduces profitability which results in expense cuts (as you cannot raise prices or you lose volumes) which results in people getting shafted when they come to claim.

 

 

Capping, and moderation

To help combat the price differences between your old premium and your new one insurance companies put a mechanism in place called capping. This prevents your premium moving too much away from the previous year. This has advantages and disadvantages to both side. For the insurer an advantage is that premiums that are roughly the same tend to result in a high retention rate, so if you don't put the price up too much you can keep the business that you may have lost. A disadvantage is that you may end up underpricing the risk and making a loss. For the customer an advantage is that your premium may increase, but usually it won't increase by a lot (not always true, for example if you have had a claim).

 

However there are also some disadvantages for a customer. If your premium has gone up by, say, 100%, but there is a cap of 20% per year then you will be guaranteed a 20% price increase every year for the next 5 years. You may wish to change to a different insurer sooner. The second is that capping works with reductions as well as increases - providing a floor. This means that you may again get cheaper insurance elsewhere.

 

Moderation is a fancy word to describe the above process but rather than providing hard limits it does something cleverer based upon how much money the insurer think they can get you to pay - like how a clothing company works out how much extra it can charge you on top of a £5 shirt because it bears their brand name.

 

 

Inflation

One thing that rarely gets mentioned is inflation. Prices go up. The majority of insurance customers don't notice this as the premium decrease they get for getting older (to a point) and increases in NCD bonuses tend to offset this by a large factor, and for younger drivers will even mean that the premium is reduced drastically. However inflation does kick in - let's say you took a policy out for £450.00 last year. Remember that VAT rise a couple months ago? Well insurance tax rose from 5% to 6%, so that's an extra 1% you have to pay (£454.50). Also inflation is running at around 3.5%, according to the Consumer Price Index. Sadly however that takes into account a lot of things that are not insurance related (like food), so claims inflation (the amount of extra money required to pay for a claim) has grown by about 8% in the last year alone (£490.86). However because the insurance industry is not making a profit, average premium inflation (the amount your insurance goes up) has been greater, at around 12%!!! (£509.04). But then of course these things also affect the expenses of the company, because electricity has gone up, and suppliers are increasing their fees (things like paying aggs, commission on brokers). It's quite easy to see from this how prices can spiral out of control. But you may not notice quite so much if your NCD has gone up (maybe 10% reduction), or if your premium has been capped (at 20%, then your NCD reduction kicks in) etc.

 

 

Hope that's given everyone a bit of food for thought. Not saying insurance companies are angels - they're corporate entities just like Tescos and Barclays and Levis, and your local chippy. But hopefully this information will help some people to understand the system better so that they can find an insurance product and price that is right for them.

[merlin100]

Beware of Swinton Insurance Brokers. I had a 12 months policy with them simply because it was a decent quote. 12 months after this they started bombarding me with phone calls and letters to renew.

On the phone they kept telling me that ALL car insurance has increased by 40% this year alone when I knew this to be not true. I told them I was not going to renew with them as I had found an even better policy online at the same price as last year - they wanted to increase their policy by just under £200!!

One of their cons is that they take an "Admin" fee of £30+ anytime within 8 weeks of their existing policy expiring. I didnt know about this until I recieved 7 letters on the same day all containing the same policy - and the fee went out that day!!

The Direct Debit was immediately cancelled.

At NO time did I ever agree to renew this policy and I think it stinks that many insurance companys try to involve you in negotiations beyond the expiry date of a contract by putting the onus on the customer by saying things like " if you dont contact us ( so we can pressure you into renewing), we will "assume" that you wish to renew the policy".

Ive written the £30 "Admin Fee" off - but wont get fooled again.

But surely, even with the creation of these "Minimum Term Contracts" - whereby some sleezy little firm dreams up another consumer con - they absolutely cannot renew a policy automatically without some concrete agreement from the customer?

It really is just another con in "rip-off" Britain!!

[hightail]

Full Cycle

This is the term that is used to describe auto-renewing insurance.

 

Is this terminology what saves auto renewals from being plain old inertia selling?

[Wulfyn]

I don't think it's the terminology, it's that you "agreed" to it when you took out the policy in the first place - even though it was probably never explained to you that this was so.

 

Inertia selling would be when the policy came up for renewal and your insurer decided to remove one of the drivers and offer a price based on that, which i have sadly seen done and is completely illegal in my opinion as the nature of the contract has changed.

 

 

For me the problem is not that insurers do this, but that the customer is not told about it beforehand and so it comes as a nasty surprise. If customers were told, and therefore had the information to decide that such a product was not suitable for you, then I think that would be treating customers fairly because then it is your choice.

[Mallrat83]

So effectively you are saying that you would often be able to match or even beat a quote from elsewhere but only if an existing customer contacts you and complains. Why not just offer a reasonable renewal premium in the first place instead of taking the p***?

 

Strikes me as being a very odd concept of customer service.

 

Thing is, I work for an insurance broker. We dont get the full premium. the insurance company do. The insurance company gives the broker the quote, and included in that quote is commision that the broker will earn.

 

So...

 

Insurance company quote £500 for you, but in that quote theyve given the broker £30. That means the insurance company get £470 and the broker gets £30. the broker will only get £30 from that premium so effectively

 

Brokers will always present the price given to them, and if your not happy with it, they can look to discount against the commision that they would earn from you renewing with them. So if the broker quoted the lowest possible price to everybody, they would not make any money and would go out of business.

[robert collins]

Automatic renewal is spreading amongst us more rapidly than mutated flu strains. Online forums are just beginning to realise the ongoing legal implications relating to the scurrilous practice of automatic renewal, and that it is, as yet, unquestioned by regulatory bodies such as the Financial Service Authority (FSA) and not covered by the Treat Customers Fairly policy.

 

insurancefacts.co.uk

[Wulfyn]

Auto-renewal is absolutely covered by TCF.

[Bolthole]

This is very simple - I buy insurance from you. The policy lasts for one year. At the end of that year it is not your decision to spend my money on your product. It is frankly decietful rubbish to suggest that the fact that you inform us that you are going to do this makes it okay. I shouldn't have to tell you not to spend my money. You have my card/financial details because this is the only way to pay you. My giving you my card details is an act of trust - you using these details to make a repeat purchase of you product is a betrayal of this trust. Suggesting that 'there's too much cynicism around' is adding insult to injury. You are simply exploiting the fact that most people are lazy and not as sharp as they might be about their financial affairs.

[Dave Shears]

Bennetts have caught me out and I currently hold two Policies on my Motorbike, is this legal, have I not broken the law?

[rowperfect]

Bennetts are definitely con artists. I called up 3 months prior to renewal date and asked to have it turned off. I was told:

i) the request may not be processed in time

ii) if I make any changes to the policy automatic renewal will be be re-enabled without asking for my approval

iii) I should call up after receiving the renewal latter and tell them again that I don't want to renew.

 

I told them I have a record of the call and will see them in court if they try anything.

[merlin100]

I forgot to mention in my last post that our sales guys do have to ask you if we can auto renew your policy the following year, its in our scripts. Its also in our renewal scripts when paying renewing over the phone as well.

 

In regards to whether auto renewals are right, i guess it all depends on your point of view. From a consumer point of view i can see your point in that it shouldn't be forced onto the consumer, but as i said above ,this isn't the case as the consumer will always be notified. I can also see the benefits of auto renewing policies.

 

E.G 1) Mr Smith who's 80 years old, been insured with the same company all his life and has no intention of changing. Every year he just checks his docs to make sure there's no errors and then just leaves the policy to go through without lifting a finger.

 

E.G 2) Mrs Smith, going away for a holiday for 2 month and a week before she comes back, the policy is due to renew. Is happy for the policy to be auto renewed so she has cover incase anything happens and is also safe in the knowledge that if she doesn't like the policy when she returns, she can cancel it under the cooling off period and not pay a penalty.

 

People nowadays are getting very cynical and are always expecting the worst from companies. True there are some very dodgy people out there that will try and screw you the first chance they get, but that's what the regulatory bodies are for. When things go wrong, they can be put right again.

 

 

DA

So why not just offer a good renewal price rather than attempt to "auto-renew" with a usual very large hike in price?

Theres nothing convenient about this [problem], insurance firms are trying this all over the place - making out its for the customers benefit even though the policy is usually far more expensive than the last one. It gets rid of any "best quote" and I wonder what their percentage estimate is of "customer complaints to customer acceptance" is?

Its a dreadful and decietful practice and should be stopped immediately

[hightail]

Its a dreadful and decietful practice and should be stopped immediately

I'm with you 100% on this. My own thread on this topic shows that the companies are determined to set their systems to inertia renewal even when a premium is paid in full at the start and continuous authority denied.