JEFF PRESTRIDGE: The insurance market flaw that must be rectified NOW
What a wicked game insurers play with their customers.
Reader Peter Legind, from Saxmundham in Suffolk, contacted me last week about his experience with Hastings Direct, and it's all rather unedifying.
Peter, a 61-year-old semi-retired buy-to-let landlord, recently received a renewal notice for the buildings and contents insurance on the three-bedroom semi-detached home where he lives with his partner Julia.
The renewal from Hastings was for £404, a 27 per cent increase on the previous year.
Given crime is not an issue in the local area, Peter thought that maybe the rather stiff price increase was either a result of his creeping age (insurers don't like the over 60s) – or (tongue in cheek) that Hastings had decided the imminent building of nearby nuclear reactor Sizewell C would ramp up local claims.
Reader Peter Legind had difficulty cancelling his policy with Hastings Direct
Sensibly, Peter shopped around and found alternative cover with Quotemehappy, an Aviva offshoot. Although it cost £326, he bought it via a cashback website, providing him with a further saving of £36.
A result.
Given that the Hastings policy was set up to auto-renew, he sought to cancel it via the insurer's website.
'Working out how to do that was as difficult as finding a Labour politician unwilling to take a freebie,' he says.
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Eventually his partner Julia got through to Hastings via phone (no mean feat), only to be told that they should not have been so hasty to jump into Aviva's lap.
Rather than £404, it could now offer a price of £304 – a reduction on the previous year. Julia was perplexed, understandably thinking £404 was Hastings' best price. 'No,' it replied, 'prices change on a daily basis.' How were Julia and Peter to know that?
Although Julia told Hastings to take a proverbial jump, her and Peter's experience highlights flaws in the regulation of insurance renewals.
It surely cannot be right for an insurer to offer a renewal premium – and then, at the point of the customer accepting that premium, not tell them that the cover has actually fallen in price.
Customers should get the lower of the two prices – that quoted in the renewal notice or the price at the time the renewal is made.
It can't just be people who ring up threatening to leave – or, as in Peter and Julia's case, customers who have already decided to take their business elsewhere – who are told they can get (or could have got) a cheaper renewal premium.
The financial regulator now insists that insurers give existing policyholders the same premium that a new customer would obtain for identical cover.
Direct Line is currently handing back £30 million to customers as a result of falling foul of this rule.
The regulator should now extend the rule to protect those who currently are denied the benefit of falling prices between receiving a renewal premium and when they sign up for another year.
- Do you agree? Please email me at: [email protected]
Bad advice cripples critical illness cover
CIExpert is the country's leading scrutineer of critical illness policies.
Such plans pay out a pre-agreed, tax-free lump sum if a policyholder suffers a serious health condition such as a stroke, heart attack or Parkinson's. Most also allow you to cover your children as part of the plan you take out, as well as obtain access to a range of medical-related services.
Yet CIExpert believes that such plans are sometimes being misadvised and misbought.
It suggests that people, on the back of advice from financial advisers scared of running into compliance issues, too often buy joint plans when two single policies would nearly always be better for them.
If a joint policy is bought, cover ends if a claim is made, resulting in a full payout – which leaves the household without cover.
But if both adults in a household have single policies and one makes a full-payment claim, the other's plan remains intact. If a child's claim is made, both policies will pay out rather than the one payment from a joint policy, and the plans will remain in force.
CIExpert says that the average monthly cost of a 25-year joint policy providing £125,000 of cover for a couple both aged 35 with one child and another on the way works out at about £87 a month. This includes child cover.
But if the same couple bought two individual policies, each providing £125,000 of cover, the combined monthly cost would be £93 – just £6 more.
For this extra cost they would get two lots of cover, plans tailored to their individual needs (for example, pregnancy cover for the mother), two payouts if a child claim is made and policies they could continue with in the event of divorce further down the line.
If you have grown-up children thinking of buying critical illness cover, maybe in tandem with a home purchase, urge them to consider buying individual policies rather than a joint plan. Breadth of cover at an affordable price should always be the financial priority.
A fund manager rewarding loyalty? You won't get that from a tracker
Blue Whale Growth Fund's manager Stephen Yiu
Fund management groups have done little to woo customers in recent years, leaving investment platforms to do their marketing for them.
As a consequence of such a lackadaisical, arrogant approach, investors have steadily drifted towards low-cost passive funds that simply track stock markets.
So hats off to Blue Whale Capital for taking a stand and waving a flag for good active fund management by deciding to reward its investors for their loyalty.
Subject to regulatory approval, from the start of next year it will rebate one per cent of the annual management charge back to investors in its Blue Whale Growth Fund.
The rebate will kick in only if the fund's value hits £1 billion (it's around that level currently). It will then rebate another one per cent for every £1 billion increase in the fund's assets.
The saving will be paid back to investors via a rebate of the annual management charge into the fund, thereby effectively increasing its value.
Most investors in this fund pay an annual management charge of 0.75 per cent, so a one per cent rebate will drop this fee to 0.7425 per cent.
Launched in late 2017 with £25 million of seed capital from Peter Hargreaves (the co-founder of Hargreaves Lansdown), Blue Whale Growth is an investment success. Managed by Stephen Yiu, it has provided initial investors with returns in excess of 150 per cent. By way of comparison, the average global fund over the same period has delivered an 80 per cent return.
Yiu runs a high conviction portfolio, comprising just 27 stocks with big exposure to the United States and tech stocks in particular. Top ten holdings include Meta and Nvidia.
It's a fund that could do well under President Donald Trump, whose triumph last week was largely down to promising to get inflation and interest rates moving downwards.
'It's incumbent upon fund managers to demonstrate to investors that we are offering something attractive,' Yiu told me. 'It would be lovely if other investment houses followed our initiative.' Let's hope they do.
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