Cover: Jackie Jay received a £715 quote
British Gas is embroiled in a ‘scam’ where its most loyal customers are being charged up to £500 more a year for exactly the same boiler and heating breakdown insurance that new customers are receiving.
The energy giant is squeezing this extra cash out of up to four million customers who have taken out its HomeCare cover. Experts believe it is a desperate move to make up for a severe dip in revenues caused by a haemorrhaging of energy customers.
British Gas, owned by FTSE 100 listed company Centrica, recently admitted it is losing almost 100,000 customers a month as a result of price hikes that have added £100 to average energy bills in just a year.
It offers a range of HomeCare insurance deals – starting from straightforward boiler cover though to policies that embrace hiccups with central heating, plumbing, drains and electrics.
The energy giant recently wrote to customers stating it was ramping up the cost of annual cover by as much as 25 per cent. It now wants long-standing customers to pay as much as £715 a year. But cover for new customers can cost as little as £234 a year with a £50 gift card thrown in as an extra incentive. So loyal customers are paying three times more for the same cover.
The City’s regulator recently launched a probe into the multi-billion pound insurance market amid claims that loyal customers are routinely paying more for cover than new ones.
The Financial Conduct Authority says many customers who have been with the same insurer for five years are paying 70 per cent more for cover than someone buying the same policy for the first time. This is an injustice that over the past year has regularly been highlighted by The Mail on Sunday’s Broken Loyalty campaign.
James Daley is founder of consumer website Fairer Finance. He says: ‘The game could soon be up for rip-off insurance policies. This probably explains why British Gas is squeezing every last drop out of its boiler cover customers while it can. The profit margin on this policy must be huge if it can get away with offering new customers cover for a third of the price that loyal customers are paying.’
Campaign: Wilbur the penguin is part of a massive British Gas advertising drive
The bid to exploit existing boiler cover customers is being backed by a £55 million a year ‘retention marketing’ campaign, with advertising agency MediaCom using cartoon penguin Wilbur to promote the cover on television at peak time over the festive season.
The energy supplier has almost 13 million customers with up to a third having some form of boiler and heating breakdown cover. The sales of this insurance account for up to £1.5billion of the total £8.5billion in revenue that Centrica raked in last year from UK energy and services customers.
Daley adds: ‘These adverts play the emotional card by showing the company is always there for you – even on Christmas Day. But the harsh reality is that you would be far better off saving money in a regular savings account in case of a heating emergency rather than line the pockets of a greedy energy giant.’
Jackie Jay has been a British Gas customer for more than a decade and has its boiler insurance. The 48-year-old married mother of two, from Chislehurst in Kent, paid £578 for emergency cover last year and was singularly unimpressed when a renewal notice for £715 recently arrived in the post.
Jackie says: ‘I rang to complain and got through to a pre-recorded message instructing me to call back in a couple of hours. I assumed it must have been inundated with complaints. After finally getting through and arguing my case they agreed not to increase the cost of my cover.’
Despite escaping the premium hike, Jackie is still paying more than new customers. The ‘HomeCare Four’ cover she has is advertised online for £20.50 a month – discounted to £234 a year for customers willing to pay the first £60 of a claim. Without an excess it costs £32 a month – or £372 a year. The price includes an annual boiler service that otherwise would cost £79.30.
Jackie says: ‘Even the yearly service has turned into a hard sell. British Gas keeps telling me I should replace my old boiler with a new one costing more than £3,000 – and that it can sell me one on an interest free deal. Yet there is nothing wrong with the one I have got.’
British Gas told The Mail on Sunday: ‘In line with standard practice across the insurance market our introductory prices for new customers are non-risk based. At renewal the prices are determined by the level of risk. This takes into account a number of factors to ensure all customers are paying a fair price. We do not wish to comment on our marketing spend.’