Wake up call for Direct Line customers


Wake up call for Direct Line customers

I have a lot of time for the work of Brignall and King who are the consumer champions of the Guardian newspaper.

On Saturday 11 September 2010 they reported on the experience of a customer of Direct Line who insured their home with Direct Line. As I recall their advertising they proudly boast you cannot get a quote from them on a comparison website.

The report goes like this:

“I’ve been a loyal home insurance customer of Direct Line for 11 years. During the first 10, I had not paid too much attention to my insurance costs. I pay by direct debit and the costs had gone up steadily to £93.87 a month – £1,127 annually.

 Last year I got round to querying the amount that I was paying and rang Direct Line. After three minutes on the call, the rate was cut to £609 – a 45% reduction! Although not the cheapest quote that I had received, the hassle of changing provider meant that I accepted, and I assumed that this would now represent the baseline for future prices.

 Imagine my surprise when this year’s renewal notice came through saying: “Thank you for insuring your home with us for the past 11 years. It is time to renew your cover and the annual premium for the next year will be £1,154. Direct Line went on to say that “if the policy still meets your needs, there is no need to do anything”.

I am staggered that Direct Line can send through a message which makes no reference to the increase. I rang Direct Line promptly and had the cost reduced back to £691, still a 13% increase but just about acceptable. Perhaps you should warn other Direct Line customers of this practice. PH, Twickenham, Middlesex

 This is a wake-up call for all those who have not looked at their home or car insurance renewal for several years, because you could also find that you are paying twice as much as you need to. Insurers work on the basis that they offer a cheap deal to grab you as a customer and then slowly increase the premium each year. We have written a number of stories about this – and this is not the first time Direct Line has featured in Guardian Money for this sort of practice.

We asked the insurer to comment, but it failed to address the points you make. Instead, it said it “constantly reviews prices to reflect changing costs and market conditions, and this can result in insurance premiums going up and down”. Next time your renewal comes through do a price comparison – it takes five minutes and could save you hundreds of pounds.”

I have quoted the report, and I hope its authors will forgive me, but it is of value, and very surprising. You might also find the same thing is happening with the interest rate offered by your bank.

Be very careful when you renew your insurance. You may feel loyal to your insurance company, but how are they rewarding you.

The insurance companies and banks call it customer inertia. In English that means once they are with you, your customers will stick with you as they do not have the energy or initiative to keep checking they are getting the best deal.

Customer inertia is going to be one of our favourite topics.