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Home insurance auto renewals are a rip-off.
How do home insurance companies try to squeeze more money out of you?
They use language designed to make you think they’re doing you a favour.
It’s definitely meant to con you into thinking they’re on your side, even though you’ll likely end up paying them more than you need to.
It’s almost as if I planned it – in 2016, just after writing about how financial inertia can affect your mortgage and insurance costs, I received the renewal letter for my home insurance.
This letter was everything I’d hoped for to illustrate my statement – let me quote what they said and translate for you.
My home insurance renewal letter translation:
“Dear Mrs Balders
Your home insurance is due for renewal shortly, and we’d like to tell you about the next steps in our renewal process to make things as easy as possible.
(Things could become difficult from here on. Do you really think you can handle that aggravation?)Because you’re a valued customer we have kept your renewal price as low as possible.
(We care about you and have made a lot of effort to find this price. Trust us, it’s not worth looking elsewhere.)To make life easier we will automatically renew your policy for you so sit back and relax while we do the hard work.”
(Life is hard enough as it is; looking for insurance is hard work. It will wear you out. You’d rather be relaxing on the sofa with a nice cuppa, wouldn’t you? We care about you too much to let you get worn out. We’ll do all that for you because we’re your friends.)Are insurance companies actually your friends, though?
No.
They quoted £193.51 for the year – doesn’t sound bad for a year’s insurance of my only major asset, but I know it was £157.45 in the previous year. I hadn’t made a claim, so they’d raised my premium by £36.06 for no particular reason.
Hey, I reasoned, maybe it’s due to insurance costs being up all around.
I thought the best thing to do would be to quickly run a comparison search on Quidco*, because that’s where I found my cheapest insurance quote the year before. The first search I ran came back with quotes starting from £130.04.
That means that not only would I spend £27.41 less than the previous year, I’d spend £63.47 less than my current insurer wanted.
Now, I didn’t buy the insurance policy straight away as I wanted to wait until I had a bit more time free to check as much of the market as I could. It probably took 10 minutes or less to run the first search, so I doubt I’d spent a full hour chasing it up in all.
Yes, I’d rather be sitting back and relaxing, but not if that hour’s relaxation is going to cost me £63!
Cashback makes home insurance cheaper
And let’s not forget one very important bit: the cashback.
I had earned £20.36 in the previous year on my policy, which brought the actual price down to £137.09. My current insurer wouldn’t give me a cut of their commission, since they’re not paying any!
If I had taken up the cheapest quote from my search, that would have given me £19.29 in cashback, bringing the price down to £110.75. That’s potentially a discount of over 42% for a few minutes of clicking on a laptop.
Auto renewals are a laziness tax
It may be counterintuitive, but loyalty isn’t rewarded.
The fact is, most insurers raise their premiums every year; think of it as a tax on laziness. Want to beat the laziness tax? Commit to shopping around for your insurance, and after that, sit back and relax.
Ever had a cheeky renewal quote that you beat?
