Just about exactly a year ago, faced with a thumping great increase from my motor insurer, with the help of a price comparison site I roughly halved my previous year’s premium by switching to Admiral. A year later, faced with a thumping great increase from my motor insurer, with the help of a price comparison site, I’ve roughly halved my last year’s premium by switching to Privilege.
I must make it clear: despite what I do for a living, I am by nature a typically inert financial consumer and absolutely not the kind of hyper-active rate-chaser who scours the market for trivial savings. So if I’m figuring that a few minutes on Moneysupermarket and a saving of several hundred pounds is worth the bother, I’m confident that most people are figuring the same way.
And if that’s the case, could someone please explain to me how this apparently ridiculous market works? One way or another, insurers spend a ton of money (or half a ton, anyway) acquiring new customers and offering them nice soft rates in their first year – then, a year later, they blow away every trace of goodwill and loyalty they’ve earned by demanding thumping premium increases so that even customers with third-quartile levels of inertia feel obliged to look around. And then, when they find they can save hundreds of pounds by switching, they promptly leave in a state of angry resentment, promising never to return.
(And one final point on the whole inertia issue. Left to my own devices, I still might not manage to overcome my own highish-to-high level – but these days I’m absolutely not left to my own devices. On the contrary, when my motor renewal date is approaching, every direct insurer and comparison site I’ve ever visited sends me emails inviting me to click here and save two, three or four hundred pounds: and tempted as I am to ignore them and wander away to Favourites such as cricinfo or football365.com, for four hundred quid I feel I can’t refuse.)
As far as I can see, only two possibilities arise from all this. Either these firms are behaving stupidly and short-sightedly, and marketers and consultants all round the industry should be vigorously advising them to mend their ways without delay; or all those textbooks, papers, pitches and presentations which go on about the importance and commercial value of loyalty and the need to develop as much of it as possible are all completely wrong.
Actually, I suppose there is a third possibility, which is that the textbooks, papers etc are right in emphasising the importance and value of loyalty in every consumer market except insurance, but I can’t really see why that should be so.
I’d appreciate any help, thoughts or views on all or any of this. I don’t actually work for anyone in this market at the moment, which you may think in the light of my evident confusion is probably just as well. But you never know, I might get a call from one of the major players at any moment (actually, a minor player would be fine too). And I’d hate to go in and have one of those really terrible meetings with them.
What is it people call them? Oh yes, real car-crash meetings.