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Citizens Advice claims loyalty penalty makes up 100% of home insurers' profits

Citizens Advice claims loyalty penalty makes up 100% of home insurers' profits | Insurance Business UK

Citizens Advice claims loyalty penalty makes up 100% of home insurers' profits

National charity Citizens Advice, based on its research, has made a bold assertion – that UK home insurance providers make 100% of their profits from longstanding customers with policies of at least six years.

Here are the numbers from Citizens Advice, which last year lodged a super-complaint to address the issue of pricing:

How long consumer has been with company

Proportion of policies

Estimate of profit margin (%)

Profit on each year £m

Cumulative profit £m

New customer (first year)





First renewal (second year)





Second renewal (third year)





Third renewal (fourth year)





Fourth renewal (fifth year)





Fifth renewal (sixth year)





Consumers at sixth renewal or higher (seventh year and higher)





According to Citizens Advice’s study, loyal policyholders are paying an average annual premium of £325 for their sixth year of insurance while new customers shell out £172. The price for existing policyholders, noted the charity, moves up to £238, £267, £290, £304, and £325 for the succeeding years.

Read more: Insurance pricing to come under scrutiny as FCA announces market study

“It is appalling that home insurance companies are making all their profit from exploiting loyal customers,” stated Citizens Advice chief executive Gillian Guy. “What makes this worse is that vulnerable people are likely to be the most loyal to their provider.

“Since we submitted our super-complaint about the loyalty penalty, some companies have rightly promised to treat their customers better. Yet many more are still choosing to make their profits off their most loyal and vulnerable consumers.”

Read more: “The insurance industry recognises this is a problem”

The charity estimates that 3.75 million policies have been held for a minimum of 11 years, and that 71% of these customers are potentially vulnerable. 

“The CMA’s (Competition and Markets Authority) response to our super-complaint was clear that regulators must come up with a plan to tackle the loyalty penalty by June,” added Guy. “The clock is ticking; the FCA (Financial Conduct Authority) must act quickly to stop this systematic scam.”