This is an audio transcript of the Money Clinic podcast episode: ‘How can I cut the cost of my insurance cover?’
Claer Barrett
Hello, it’s Claer. Before we begin, I’d love to hear a bit more about you and what you like about Money Clinic. We’re running a short survey, and anyone who takes part before the 29th of August will be entered into a prize draw for a pair of Bose QuietComfort 35 wireless headphones. Spiffing. You can find a link to the survey and the terms and conditions for the prize draw in today’s show notes.
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The cost of insurance premiums keeps going up and up, but service levels for those who make a claim are coming down according to a new report. So how can you make sure you’re getting the best deal and the best cover when buying insurance for your home, your car, your holiday or even your pets? And with insurance practically becoming a luxury purchase, what more does the financial regulator need to do to ensure premiums are fairly priced and the claims are dealt with promptly? Welcome to Money Clinic, the weekly podcast about personal finance and investing from the Financial Times. I’m Claer Barrett, the FT’s consumer editor.
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The rising cost of insurance premiums mean they’re taking a bigger bite out of household budgets. But those who do pay to protect themselves are experiencing rising levels of pain when making a claim. That is the conclusion of an in-depth report by Which?, the consumer group, released this week that analysed over 8500 complaints made to the Financial Ombudsman, plus a survey of more than 3000 consumers who’ve made an insurance claim in the past three years. With me in the studio today to discuss its findings are Sam Richardson, the deputy editor of Which? Money.
Sam Richardson
Hi, Claire.
Claer Barrett
. . . and the FT’s insurance correspondent, Ian Smith.
Ian Smith
Hi, Claer.
Claer Barrett
Well, thanks for being with me today. But, Sam, let’s start with the Which? report that came out today. Give us the top lines.
Sam Richardson
Yes, it’s a fairly damning number. Almost half, 48 per cent of all people making a claim whether or not it was accepted experienced at least one problem whilst making that claim. So we’ve got issues like having to chase the insurer for a decision, having to re-upload documents, calling up the insurer only to discover they don’t know anything about you on file at all, and you have to start again. All very irritating.
Claer Barrett
Yeah, really really irritating. You mean if consumers do make a claim, they’re facing more of a battle to get the insurer to pay up, even though they’re paying more and more and more for the premiums?
Sam Richardson
Yes. It’s incredibly frustrating for people. The one time they feel they need to use the insurer, especially for loyal customers who’ve never claimed in 20 years, and very disappointed when they do.
Claer Barrett
Now, having analysed a significant data set, what kinds of problems are customers experiencing?
Sam Richardson
So 1 in 5 reported difficulties getting updates on the status of claims and the time it takes to decide and pay. That could be a real issue for instance, if you’re making a home insurance claim and you’re out of your home, perhaps living in temporary accommodation, waiting for it to get fixed. And people have a real problem understanding the decisions that insurers have taken. One in four who had claims rejected said they didn’t understand why. The big problem with that for us is it really limits your ability to complain and potentially take that complaint to the ombudsman because you really don’t know why, you don’t know if you have grounds to complain. It’s really disempowering customers.
Claer Barrett
Now, you also found that people who were severely impacted by the incident that triggered their claim, whether that’s a car accident, home emergency or a ruined holiday, these people were nearly twice as likely to experience problems with their claim. Why do you think that so?
Sam Richardson
We tend to think of vulnerable customers perhaps associated with disability, but actually any of us can become vulnerable. For example, going back to, you know, you’re out of your home because of a home insurance claim and that puts you under a lot of stress. Insurers are meant to look out for vulnerable customers. This has been in place for a few years now. Even pre the Consumer Duty, which I’m sure we’ll get to at. But evidently, insurers aren’t looking out for those customers and identifying them and putting in the extra support they need.
Claer Barrett
OK, let’s take a bit of a step back here, Ian. You’re the FT’s insurance correspondent. Now, you’ve been listening to what Sam has to say about this report. So people are paying more for insurance, but Which? certainly thinks they’re getting less value for money. What wider factors are at play here?
Ian Smith
Look, I think making a claim is one of the significant interactions that customers have with their insurer. And it’s nearly always a negative one. And I think it’s one reason why people rate insurers incredibly lowly as compared to other financial services providers on Which? data and other general service providers. And a significant factor in that is how expensive insurance has gone across home, across motor in particular. And so what we’ve seen is a significant cost inflation. So motor insurers have had two very bad years for underwriting. So there’s longer run factors there that we can come on to. But all of that is driving up the price of car insurance.
And home insurance is also getting more expensive. So last year was a record year for bad weather claims against home insurers. And we’re seeing inflation there too on . . . in rebuild costs. I was really struck by the human impact in the report, in the impact on people. A significant factor in that now must be that they’ve paid so much for this product. And they are also experiencing delays in claims settlement challenges for something they’re paying quite a lot more for than a few years ago.
Claer Barrett
Yeah, it really sticks in the craw. I mean, Sam, of course when you take out insurance and pay for that premium, you really hope that you won’t ever have to make a claim and talk to your insurer. But those people who are, what’s your take on what Ian has to say?
Sam Richardson
I don’t doubt that people are aggrieved by price rises and are looking to get more out of their insurer as a result. Yes, more people might be claiming because they’re angry, but what they’re claiming about is valid in more cases, at least in the view of the ombudsman. And of course, you could say, you know, only a small number of cases will make it to the ombudsman out of complaints.
Ian Smith
And Covid is really important context here as well, both on travel because people didn’t travel, but in motor, if people didn’t drive, you saw a significant fall in accidents at that time. And then we’ve had a real massive increase again in frequency across a number of insurance lines. And the inflation that we’ve seen has been coming out of that Covid period as well. So I think the market has been under a fair amount of stress. And then it’s tried to reprice. But yeah, there’s been a significant uptick in claims. They’ve been managing that. And according to this report, not as well as they might have done.
Claer Barrett
Now, Sam, you’ve shared the Which? report with the big insurance groups. What did they have to say?
Sam Richardson
So many have been receptive. They pointed out that they deal with hundreds of thousands of claims per year in many cases. A lot of those are complex. Of course, with travel insurance that covers a huge number of eventualities. It’s a lot more complex than, say, car insurance. And insurers point out it’s only a small proportion where things go wrong, and they’re endeavouring to improve the service.
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Claer Barrett
As is so often the case with personal finance stories, it’s the human cost, not just the financial cost, that makes these kinds of insurance disputes so hard to bear. Here’s what happened to Which? member and Money Clinic listener Louise, who spoke to Money Clinic producer Tamara Kormornick about what happened when she tried to claim on her travel insurance policy.
Louise
So I booked a holiday, a family holiday to Spain, and I had insurance purchased through Axa insurance and we were due to go on holiday in August 23rd, and unfortunately, it was around the 26th of June when my father-in-law had a stroke. I cancelled the holiday within around 48 hours, because I knew that the cancellation charges would get more and more. I contacted the broker. They gave me the link to the portal and I started the process on the 7th of July.
Tamara Kormornick
So 7th of July, everything’s uploaded. What happened next? Did they get in contact with you, letting you know what status the claim was at?
Louise
So within, I would say about seven to 10 days, I had an email asking me to upload my documents again, but not to the portal. They asked me to email them. So I thought this was quite strange, but I did as I was told. And every time you send something over by email, you get an email back to say your documents have been received.
Tamara Kormornick
OK. So after you emailed all of those documents across, what was the next stage?
Louise
They asked me to get some extra evidence. So they wanted us to provide a doctor’s letter. So I went to my father-in-law’s doctor with his permission, and I paid for the doctor to write a letter to say that he wasn’t fit to travel. And there was no pre-existing illnesses. So they’d ask for extra paperwork, and I sent that over to them. They’d sent out another medical form, and they asked me to go to the doctor, pay again and the doctor had to answer specific questions from Axa insurance. So I’ve done that. I’ve paid again because the first doctor’s note wasn’t suitable as far as they were concerned. I was contacting the insurer by phone and I was getting very confused because I explained to them that I’d already uploaded everything to the portal and they said, well, if you just send it over again, we can get this sorted out within about 10 working days. I used to wait 10 working days and then I would call them again. And then I would have the same conversation over and over again.
Tamara Kormornick
That sounds exhausting.
Louise
It was exhausting and it led me to tears, which sounds absolutely ridiculous, but I couldn’t believe that an insurance company, any company, could behave in such a way and get away with it. Because I felt like there was nothing that I could do. It got to the 10th of October. They’d emailed me to ask me to provide two years’ worth of medical records for my father-in-law. That was the final straw for me. They’d overstepped the mark. It was intrusive as far as I was concerned. It was beyond reasonable. Axa would not say no to my claim because they couldn’t say no to my claim. They were just prolonging the process.
Tamara Kormornick
Right. And could you tell me about the complaints process?
Louise
So long story short, they put a lovely lady on the phone who looked at my case immediately, told me that they’d had everything they needed since July in order to process my claim and that there was no reason why the claim couldn’t have been processed way back in July. And she was really sorry. I certainly didn’t want to have another battle on my hands to try and negotiate some better payout for the distress it caused. You get to a point where you just want the money back that you’ve lost. That’s all it was.
Tamara Kormornick
Yeah, absolutely. Well, thank you, Louise, for sharing your story with Money Clinic.
Louise
Thank you. Thank you very much. And thank you for having me.
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Claer Barrett
Louise estimated she had over 20 phone calls with her insurer during the whole claims process, totalling 25 hours, and was given £150 in compensation. Axa, their insurer, said they were sorry for the issues Louise had experienced during the processing of her claim, acknowledged that on this occasion, the service provider did not meet the high standards they aim to achieve, and they’ve provided £150 compensation in recognition of this. A spokesperson said, we deal with over 200,000 travel claims a year, and unfortunately a small percentage of these do result in a complaint. Our ambition is to learn from any complaint and improve customer experience.
Well, Sam, Louise summed it up so well. And it’s also worth noting that claims situations like these are rare. But why is it with one year of the Consumer Duty behind us, these sorts of problems are still happening?
Sam Richardson
I’ll just start, I mean, Louise is not alone when it comes to starting a claim. According to our survey, 1 in 5 people said they had to repeat information, repeatedly shared documentation. So there are a couple of reasons. I mean, insurers were expected to provide good customer service pre the Consumer Duty.
Claer Barrett
This is true.
Sam Richardson
It didn’t start last year. The FCA recently looked at whether insurers have been kind of monitoring their own service since Consumer Duty began, and said that a lot of insurers were obsessed with the process rather than the outcomes. They say, OK, we sent this customer a letter on these and these dates as instructed. The customer still ends up unhappy in many cases and going to complain. We say the FCA, the Financial Conduct Authority, needs to crack down on insurers that aren’t abiding by the duty they had many years in advance of the duty beginning, and they’ve now had a year after it’s come in to change systems. Yet complaints are still rising.
Claer Barrett
So you’d like to see closer scrutiny applied to the claims process from the regulator. Ian, what would you add to this?
Ian Smith
I was speaking to a senior insurance industry figure recently who said candidly and privately that there hasn’t been so much of a focus on claims management in recent years, and this person expressed to me that they think there’s going to be a shift now. Prices have significantly increased. There’s pressure from really interesting reports like this. And now you have periods during the insurance industry where they will focus more on claims management because it can be huge, a performance ad for an insurer if you manage claims well. Some insurers pride themselves on how well they manage claims. It can be a huge retention force.
Claer Barrett
They might get the Which? recommendation.
Ian Smith
Exactly. So the only other point I’d make is that there’s still a lot of a focus, especially politically, from a new government who, in their manifesto, promised to crack down on soaring insurance prices. There’s still a lot of focus on prices. There’s still a live debate about the kind of value for money of people that are getting at the front end as well.
Claer Barrett
Now, as we’re sitting down to record this podcast, chaos is reining in airports around the world with the IT outage. Give us some tips on travel insurance, because it’s really something that people should not be without this summer.
Sam Richardson
Even if you’re just going to Europe and you’ve got your Ehic or Ghic, this European health insurance card or general health insurance card, there’s so many things that that doesn’t cover, such as any sort of travel disruption if that takes place. So what we hear with travel insurance, especially from older people, is the price rising almost exponentially, especially if they have a health condition and it can be quite a minor health condition, one you wouldn’t think would matter when you’re travelling, what we would say for that is if you’re running multiple quotes, not getting reasonably priced results, there are two specialist directories of medical insurance you can go to. One of them is run by Money Helper, which is a government website. The other is run by the British Insurance Brokers Association. However, always do the comparison sites first because those specialist insurers, you know, they do incur those extra costs. But I’d certainly recommend those directories to anyone with health conditions who is struggling to get travel insurance.
Claer Barrett
Now with home, with travel insurance, you might be tempted to skip taking that out. You could be OK. But one insurance bill that millions of people, of course, have no choice but to stump up for in is car insurance. Now, you’ve written in the FT Weekend all about how even the so-called good drivers are seeing the cost of their cover shoot up. Why has car insurance become so expensive?
Ian Smith
So insurers are not making money. They’ve been kind of had two of their worst underwriting years in their history in the past couple of years. That’s the case but they have kind of caught up now with significant rises. So I think yeah, it’s all due to this kind of long-run claims inflation. And that was really just catalysed after the initial months of the pandemic when we had the wider surge in inflation. The Russia-Ukraine war was also a factor there. And we suddenly saw supply chain disruption. Repair times for cars grew, especially for electric vehicles. So you kind of had a mixture of those longer-run effects around technology claims, inflation, medical. And then you had this kind of short-term burst in inflation that we all saw. And it was a kind of a toxic mix for motor insurance underwriting.
Claer Barrett|
What do you think will happen to insurance pricing in the near term?
Ian Smith
Possibly the quarter-to-quarter pricing has started to soften that you see on the preview price comparison websites. I think the general industry forecast is that next year, 2025, is when we’ll start to see an actual overall fall in year-to-year motor insurance prices. But prices have risen significantly and there could be other social effects coming, such as a rise in uninsured drivers. That’s definitely a concern of the Motor Insurers Bureau, a body that compensates people that are hit by uninsured.
Claer Barrett
Yeah. More people taking the risk.
Ian Smith
More people are taking risks. They’re worried about that. So we might start to see some of those effects of the pricing that’s already come through in recent years.
Claer Barrett
There’s somebody who parks a car on my street in London. They’ve got a magnetic number plate. They can peel it off so they don’t have to pay a parking charge. Outrageous. But car insurance, of course, is getting more expensive for everyone. But drivers of those top-of-the-range vehicles, you said in your FT feature this week, they face a particular problem.
Ian Smith
It’s incredible that you have seen some insurance premiums for years cover reaching 20,000, £30,000 for a Range Rover.
Claer Barrett
You could buy a decent car for that much. Right?
Ian Smith
Exactly. And so we’ve seen this huge rise in thefts. Yes, car manufacturers are trying to improve the technology to bring that down, but that’s had a huge inflationary impact on car insurance premiums in those areas. And then I also mentioned electric vehicles. We’ve seen significant inflation there not to the same degree. But you know, again, an underwriting challenge caused by significant size claims.
Claer Barrett
So you might save on the fuel and the running costs, but the insurance is going to come back to bite you.
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Now, it’s not just drivers of EVs or fancier cars who are feeling the pinch because premiums for young drivers have increased from approximately £1,000 to a whopping £3,000. Now for any young drivers or nervous parents listening in, is there anything they can do to reduce those eye-watering costs?
Ian Smith
It does come back to the same things that we always talk about in insurance, shopping around being, you know, absolutely key. Maybe more than just once to see whether, you know, a good deal has come in because an insurer has decided maybe to take that risk. There are other things you can do apart from shopping around. Consider the type of car you’re driving. This putting telematics, a black box in your car. Not everyone wants to do that, but you can get a discount for your insurance for using telematics. There are also insurance companies (inaudible) that will reward you for good driving behaviour. Premium finance is another area. Paying for your insurance for the year rather than monthly can save you according to some Which? numbers £300 for the year. So there are all these things that you can do to try and keep prices down.
Claer Barrett
Well, there’s a link in today’s show notes where you can read Ian’s FT article for free. But before we end today, let’s share some tips that listeners can use to cut the cost of motor insurance. Now I’ll start with one that I do. You know my son, he’s not a new driver. He’s 28 years old. We used to have him on the policy for our car. This year they were going to charge me an extra £800 for having him on. So what we’re doing instead is paying for insurance cover by the day. So when he does need to use our car, we use an app called Cuvva, C-U-V-V-A. I don’t like the spelling, but nevertheless it’s quite a good service. Of course we have yet to make a claim on it. You really find out how good your insurer is until that happens. But for us, paying £30 for one day is much better than paying £800 for one year.
Sam Richardson
Yeah, I mean, on younger drivers, there’s the classic one of putting the parent down as named driver, which can reduce the overall premium. There’s quite a few others. Ruthlessly trim the fat when it comes to policy features. So do you really need a courtesy car if there’s another car in the household? Do you need legal expenses cover if you don’t expect, you know, to have to take someone’s call? There’s quite a few of these. So have a look through your policy and remove them. Then go get those quotes we say from several comparison sites if you can, because there is slightly different offers.
Claer Barrett
Not all of them are on all sites. It’s just the biggest faff in the world, isn’t it?
Sam Richardson
Yes, that’s the big names that on size, NFU Mutual and Direct Line of course. And once you’ve got those quotes then go back to your insurer and haggle. Yes, it’s horrendously awkward, but over the years I’ve managed to start doing it. Actually, insurers expect it. They’re not going to instantly give in, but push them. It’s worth asking if I drop this or that feature from my policy, would you be able to give me a cheap price? Also, don’t be fobbed off by them saying we can’t give you a lower price because of new pricing regulations. That’s not the case. Haggling can still get you a low price.
Claer Barrett
Now, another obvious lever that people can pull is tinkering with the excess on their insurance policy, saying, OK, I’ll stomach a higher excess if I get to pay a low premium.
Ian Smith
But that’s obviously, there is a risk to that. And one of the worries that regulators have and insurers have more widely is that people are going to end up underinsured, uninsured on their car insurance or if they increase their excess to a point that if they had an accident, they couldn’t actually pay that excess. And maybe if I could just brought it to home insurance as well, there’s some things you can do there. Because we’ve mentioned so many on motor but on home, various kind of prevention things you can do, you know, things you can do to show your insurer that you’re low risk, like, I mean, you know, improving the locks on your house, burglar alarms, things like that, putting in flood resilience measures, even in home insurance, you know, not having a tree too close to your home that can unsettle your foundations. But yeah, there are various kind of preventive steps that you can do to show to your insurer that you’re trying to reduce your risk yourself.
Claer Barrett
One thing that I’ve noticed is some insurers, Hastings Direct is the one that springs to mind, they’ll give you a cheaper quote for a policy if you say that you’re happy to have a digital-only service without access to a phone line at the point where you’re taking out.
Sam Richardson
Yes, it’s beginning to be a trend. I think it’s fine if the saving is genuine. And they’re not, you know, cutting on this service when you need to claim. In most cases, when you actually need claim, at some point in that process, you should be able to deal with a human being. It can’t all be done at the moment by algorithms, but certainly worth considering.
Claer Barrett
Ian and Sam, thank you so much for coming on to Money Clinic today to show us how we can all be saving money on our insurance premiums. And a special thank you to Louise for sharing her story with listeners. If you’d like more advice on insurance, check out our previous episodes on the topic by clicking the link in today’s show notes.
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That’s it for Money Clinic this week with me, Claer Barrett. And we hope you found this episode useful. If you did, spread the word and leave us a review. We’re always looking to chat with people about their money issues for the show, so if you’re interested in being part of a future episode and are looking for some expert money advice, then email us. Our address is money@ft.com. You can also follow me on Instagram and TikTok. I’m @ClaerB. Money Clinic was produced by Tamara Kormornick. The sound design was by Breen Turner and our editor is Manuela Saragosa. You heard original tunes this week by Metaphor Music and Cheryl Brumley is the FT’s global head of audio. And finally, our usual disclaimer, the Money Clinic podcast is a general discussion around financial topics and does not constitute an investment recommendation or individual financial advice. For that, you’ll need to find an independent financial adviser. That’s all the small print for now. See you back here next week. Goodbye.
