JEFF PRESTRIDGE: Insurers NEED to tell us why premiums are skyrocketing

Although new rules introduced by the city regulator should result in fairer insurance premiums for loyal customers, evidence that they are working is few and far between.

In fact, all the information I’ve gathered suggests otherwise. For many home and auto insurers, follow-up premiums are literally skyrocketing – and the only way to avoid them is to look around.

As I’ve reported in both Wealth & Personal Finance and Money Mail, it’s the elderly who are hit the hardest by insurers’ renewals with inflation-busting increases of 30 percent or more.

In almost all cases, the higher follow-up premium is requested even though the customer has not asserted any claims.

Hardly a day goes by without a reader contacting me in dismay at the sheer magnitude of their renewal bounty—more Everest-like than Snowdon-like. One of the most shocking extensions I’ve received recently is from a homeowner in north London. His insurer, Liverpool Victoria (LV), wanted to increase its home premium by more than 40 per cent to almost £1,400.

He contacted them hoping to negotiate a discount, but LV wasn’t in favor of turning their backs. Disappointed, he looked around and found identical coverage with Aviva – 63 per cent cheaper than his 2022 LV premium and a saving of nearly £770 on what LV wanted that year.

The question he asked me was straight to the point: “If Aviva can offer such a good deal, why can’t LV?”

It’s a tough question and I’m not sure I have a definitive answer – apart from the fact that prices vary significantly between insurers based on claims experience (both national and local).

Also, insurers are targeting specific market segments with attractive pricing while actively deterring other demographics they fear will be hit by above-average claims.

In recent years, all insurers have had to inform customers of the previous year’s premium when notifying them of renewal.

But it’s time for insurers to provide more information – especially when it comes to a significant premium increase. Certainly, it is not beyond the ability of insurers to explain in a renewal notice why a premium changes by a significant amount. So if an increase in local crime is a trigger for increasing home insurance, the policyholder should be informed. Even if a car owner’s age has pushed them into a higher premium class, they should be informed. While that wouldn’t stop customers from browsing, it might help them understand why their premiums are rising — and keep them from getting angry.

I proposed this to the regulator – the Financial Conduct Authority (FCA) – earlier this year. At the time it seemed receptive to the idea, although perhaps it was just trying to placate me. However, the introduction of new FCA excise rules later this year gives the regulator the perfect pretext to force insurers to be more transparent about premiums.

These rules require financial companies to send messages that customers can understand. I urge every insurer to defend the lack of information given to customers whose premiums have skyrocketed without rhyme or reason.

Hubs are vital as the bank culling continues

The sorting out of bank branches continues. Another 81 closures were announced by banking combinations Lloyds and NatWest last week, bringing the total to 832 since February last year.

This increase in closures means that Cash Access UK (funded by the banks) must now put on its skates and set up banking centers (community banks) in communities that have remained bankless. So far 51 have been promised but only four of these are operational. An unsatisfactory situation. Carol Alexander lives in Welshpool, Powys, which lost its last bank in January when Lloyds closed. Although a banking center was promised in July last year, there is no sign of it. She says footfall in local shops has plummeted now that the city is bankrupt.

As banks ramp up their branch closure programmes, they should at least give Cash Access UK more financial muscle to ensure the hubs are delivered promptly. Communities like Welshpool deserve no less.

Sometimes I don’t practice what I preach

Sometimes I don’t practice what I preach. Mea culpa. My most recent financial transgression was when I recently attempted to withdraw cash from an ATM near my workplace in London.

Normally alert — checking the ATM for hidden cameras and making sure no one was standing directly behind me — I stupidly took a call mid-transaction.

The result was that the £50 I requested was nowhere to be seen when I went to take it. I panicked thinking someone whipped it away while I was pumping on the phone.

After a few hectic calls to my bank, it quickly became clear what had happened. It had taken me too long to get my money, so the machine sucked the bills back into its vaults.

A few days ago I received a message from my bank that the money was returned to my account.

Note to self: Do not take Mom’s calls when using an ATM.

Is Goldilocks Moment For Investors To Join The Market?

Mutual fund managers are perpetual optimists. When stock markets fall, they talk about buying opportunities. When they stand up, they say there is more to come.

Among the hopefuls is Christopher Rossbach, managing partner at investment manager J Stern & Co. He heads the World Stars Global Equity Fund, which invests in companies with “enduring competitive advantages” — like luxury-brand company LVMH, payments processing giant Mastercard, and other beverage company Pernod Ricard.

Last October, Rossbach compiled a study for The Mail on Sunday that showed that if investors are willing to invest for at least 10 years, they should achieve annual returns that outperform any other financial asset – even if they suffer short-term paper losses in the process .

His findings were based on an analysis of the performance of the MSCI World Index and the FTSE All-Share Index since 2000. So someone who had invested in the MSCI World Index in early 2000 would not have had positive annual returns through the end of 2009. But if If they had held out through the end of September last year, they could have enjoyed an average annual return of 6.5 percent.

“In an inflationary environment, stocks are the only large, liquid, and accessible asset class that can generate significant returns,” he told me. ‘Patience is always rewarded when investing.’

A few days ago, Londoner Rossbach reported back with an update. Despite all the doom and gloom since last October, he was keen to report that both the MSCI World and FTSE All-Share have risen – as has his World Stars fund.

Interestingly, as for investors, he said that a world “of solid global growth, interest rates between 4% and 6%, and inflation below 4% is a world to look forward to – not fear.”

“For investors, it’s Goldilocks again,” he said, referring to Goldilocks, who went into the Bear Hut and tried three bowls of porridge — one too hot, the other too cold, and the last one just right.

Rossbach believes now is a “perfect time” to invest — “neither too hot nor too cold.”