Co-op, despite its many travails, is still the “ethical” bank. So how can the group’s insurance arm explain the lousy way it treats its loyal home insurance customers?
A reader from York, Paul Landais-Stamp, emailed me this week in fury over his home insurance renewal quote. Until now he has been one of the Co-op group’s strongest supporters – he and his partner have their current accounts at the bank, have taken out one of its mortgages, and have bought its insurance year in, year out. During the bank’s meltdown he stayed loyal, hoping that “out of the wreckage something resembling an ethical alternative to the major banks will re-emerge”.
Last week he received a note from Co-op, telling him his home insurance was up for renewal from 14 January. The insurer told him the cost would be £310 after it had generously applied a 40% “no claims discount”. Without that, the price would have been £517. Still, Landais-Stamp thought it looked pricey. So he went on to a comparison website and put in the same levels of cover and excess as in his existing Co-op policy.
The cheapest, at £140, was less than half the price Co-op wanted. What’s more, nearly all the quotes were for below £300. But most galling of all was that among the cheapest insurers willing to give him a quote on his house was Co-op, wanting just £182.02.
“I rang Co-operative Insurance to ask why our renewal quote is some £128 more expensive than the online one,” says Landais-Stamp. “The answer is that they want to attract new business by offering discounted rates. The person I spoke to said that getting new customers was the priority for the board. I suggested that keeping existing customers should also figure large in the board’s priorities. He all but agreed and voluntarily offered to pass my concerns on.
“I am sure every insurance company follows a similar line of hooking customers in on a cheap rate and then relying on them not bothering to move when their premiums increase on renewal. But I am furious that a supposed ethical banking and insurance group treat their existing customers in this way.”
Home insurance is the most unethically sold financial product in the country. We have highlighted numerous examples of insurers who plunder the bank accounts of their oldest and most loyal customers with absurdly inflated premiums, while frantically chasing new customers.
I asked Co-op for a response, and it could be largely summed up as “we’re only doing what everybody else is doing”. As a kid, when I tried that on with my mum I got nowhere, but for some reason we accept that as the standard insurance industry line.
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So I contacted NatWest. You might have seen its “Fairer NatWest” adverts saying it offers the same great deals to existing customers as it does to its new ones. Its boss, Ross McEwan, announced that the bank “will stop offering deals and products to new customers that we are not prepared to offer our existing customers”.
Except that’s not quite the case with NatWest’s home insurance – though to be fair to the bank, it is going down the right path. It admits it is a tricky issue, given rampant discounting for new customers by its rivals. So it has simply stopped selling home insurance to people outside the bank, although current-account holders who buy for the first time get charged 30% less in the first year compared with existing insurance customers.
McEwan knows that’s not the solution, and says NatWest will launch a fairer home insurance product in the next few months. Maybe Co-operative Insurance should consider following NatWest’s ethical path.
But one bank doing the right thing won’t stop others engaging in the great home insurance rip-off. A free-market Conservative government has forced private energy companies to write to customers and inform them of cheaper tariffs. Why not force insurers to do the same?
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