Nationwide Building Society has admitted that some of its longest-standing insurance customers are being charged more than double the rates new customers are asked to pay.
The building society is the latest of many firms to confess to a rip-off known as “price differentiation”, where loyal customers are hit with successive premium increases while new customers with the same risk-profile are offered cover at a fraction of the cost. Consumer groups have called this practice a “loyalty tax”.
One Telegraph Money reader finally had enough when Nationwide increased his annual home insurance premium by 22pc from £824 to £1,003. He had first taken out the cover in 2012 at an initial £567. Over five years the cost had risen by 77pc, without a claim being made.
If he were to sign up today as a new customer, Nationwide would offer cover on the same terms and property for £499 – less than half what he was being asked to pay. The practice is widely condemned, as it forces consumers either to change provider repeatedly or to overpay. The elderly and those without internet access are especially at risk of higher premiums.
The Association of British Insurers, which represents the industry, said firms were prevented from collectively agreeing to abandon the practice by competition law.