Saga is the latest provider to tackle the mounting concerns surrounding dual pricing in the insurance industry. Compared to others, Saga’s approach seems to be a material step in the right direction and not a plaster to cover up the bigger issue.
Citizens Advice recently published a report showing that, on average, home insurance customers pay 89% more in their sixth year of cover compared to new customers. According to the charity, 100% of profits in the home insurance market are derived from loyal customers.
The issue is not unique to Saga dual pricing, home insurance or even to the insurance market as a whole. However, insurers are more often in the spotlight because of their importance to consumers; for example, every driver needs car insurance. According to the Association of British Insurers, home insurance customers claimed £2.3bn in 2018, highlighting the financial burden they may face without access to such products.
Saga is looking to tackle this problem by offering its home and motor insurance customers a three-year fixed premium plan, provided they do not claim on the policy. Customers are not locked in for three years either, meaning they can switch after one year if they find a better deal elsewhere.
Saga is not the first provider to address dual pricing in the market. In December 2018, Aviva launched its AvivaPlus service, offering monthly car and home insurance subscriptions. The provider guaranteed that existing AvivaPlus customers would not pay more than a new AvivaPlus customer. However, Aviva does not guarantee that AvivaPlus customers will pay the same as customers using its regular products, so the issue of dual pricing is not necessarily resolved.
More Th>n took a different approach and offered its customers unlimited cashback on purchases with well-known brands. At the point of renewal, customers can put the funds accumulated over the year towards their renewal or pay an admin fee to receive cash. Again, while this is surely a move welcomed by its policyholders, it does not tackle dual pricing.
Saga seems to have taken the largest step in the right direction but it is not yet perfect. In order to be eligible for its price promise, customers need to take out a car or home policy that has a wider range of cover than Saga’s other policies. This includes accident healthcare cover for its motor product and accidental damage cover for its home product. Premiums are therefore likely to be higher than if a customer was to take out a lower level of cover via its other products. However, explicitly stating that premiums are fixed for three years will be welcomed by loyal customers and industry watchdogs alike.
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