While a lot of our work at CHOICE is about consumer traps, we tend to focus on those that lie in the public arena – such as misleading advertising, or products that don't live up to the promise on the packaging. These traps can be observed, but they often require an expert eye, which is why so many people are members of CHOICE.
There is, however, an entirely other category of traps, which are hidden and hard for even us to find. These are particularly prevalent in products that are individually priced, such as insurance. We can investigate the policy terms – what's covered and what's not – and we can gather general data on pricing, but what we can't see is what premiums insurers are charging individual customers. And that's often where the real traps lie.
Insurers are known as some of the worst culprits for applying a loyalty penalty – higher prices for loyal, long-term customers. There aren't many good sources of data on how much more loyal customers pay for insurance, but when a New South Wales regulator looked at the issue in 2018, it found that on average, existing customers were paying 27% more for home and contents insurance than new customers.
If you've got insurance for your home and car and have been with the same insurer for more than a few years, there's a good chance you're also being fleeced
Despite knowing about this practice, I had failed to apply it to my own situation. That was until I received my recent home and contents insurance renewal notice, which indicated our premium was about to go up by more than 20%. Many people are facing increases of this scale at the moment, but it did prompt me to do a quick shop around.
I expected that I might save a bit of money, but I was absolutely floored when the best quote from another major insurer came in at around half the price I'd been quoted by my existing insurer. Based on CHOICE comparisons, I could see the policies were almost identical – the same levels of cover, the same exclusions. The only difference was that one of them cost twice as much as the other.
I am somewhat embarrassed to share this story, because it reveals how occasionally I fail to follow my own advice! But I'm also keen to share it because I know there will be many people reading this who have been wondering how they are going to afford to pay their insurance premiums.
If you've got insurance for your home and car and have been with the same insurer for more than a few years, there's a good chance you're also being fleeced. It's not too hard to take your renewal notice, ring a few other insurers and ask them for a quote based on the same levels of cover. You might be pleasantly surprised to learn how much you can save.
Stock images: Getty, unless otherwise stated.