Money Helpdesk: Turned off by ups and downs of home insurance premiums

MY HOUSEHOLD insurance company is currently advertising 10 per cent off the last premium for new customers. Yet, when my renewal premium arrived, it was 30 per cent higher than last year's. I called them to complain, whereupon they immediately said I qualified for a 30 per cent discount for being a loyal customer.

This brings my premium back to the level of last year, but the whole exercise has left a bad taste in my mouth. I feel they were just trying it on, and what if I were one of those people who renewed automatically, or perhaps an elderly person who didn't understand how all this works and just pays what is asked? Are insurance companies allowed to behave in this fashion?

BC, Edinburgh

Ian Crowder, insurance expert at the AA, writes:

It is not unusual for companies to make special offers for new business – everything from wine clubs to holidays – and insurance companies are no different. The terms you describe aren't generally available to existing customers, who in any case may well have benefited from an introductory discount at one time themselves.

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However, if an insurer thinks it may lose your business then it may be willing to offer a lower price to try to keep you as a customer – but that will usually depend on individual circumstances.

But against this background, there is constantly upward pressure on home insurance premiums and the AA's own benchmark British Insurance Premium Index has shown a steady rise in the cost of home buildings cover, for example, across the industry over the past year as insurers struggle to meet the ever-spiralling cost of claims.

However, it is a competitive market and there will always be bargains to be found.