A home insurance price war has broken out as insurers offer massive discounts and other incentives to homeowners to switch.
Saving up to 50% on home insurance is a good reason to move between home insurance companies – but these glib promotions can mask the true cost of the product.
If a homeowner is offered a discount on buildings or contents cover, then the first question is how much is the saving?
Santander has joined the battle with up to a 30% discount for customers with a Santander 123 Current Account or 123 Credit Card.
The market is crowded with ‘money saving’ offers – the Co-op has knocked 25% off prices, Aviva has a huge 50% off home insurance promotion online, if you have not made a claim for five years.
Direct Line has also slashed 50% off contents cover when bought with buildings insurance.
The cynical Insurance Blogger sees a deep discount and immediately thinks either the insurer has been overcharging customers or is inflating prices.
Why? Well, if a 50% discount is offered, that means at half the old cost, the firm is still making a profit and all the money sliced off is really them taking a cut in profits that was unjustified to charge.
For instance, if the home insurance bundle was £350 a year, but is now £175 with 50% off, the lower figure is still profitable for the company so why were they charging more before?
Then, the suspicion is the price has been put up so marketers can chop the cost to make the deal look more affordable.
Either way, that deal looks less of a bargain and a good reason to compare prices with insurers who are not offering discounts and incentives.
Someone, somewhere is paying for cheap home insurance and you can bet it’s not the insurer.