Consuming Issues: Beware - loyalty doesn't pay

Loyalty is a virtue; we like friends, spouses, colleagues and employers who are faithful. Companies, however, don't seem to see it the same way. Particularly in personal finance, they can take advantage, leaving regular customers using out-of-date technology and languishing on old, uncompetitive deals.

Insurers invariably raise premiums year after year, even if you always pay on time and never make a claim. Indeed, insurance is probably the best example of the loyalty racket.

Often, it is older people who believe that if they stay with a company, dutifully paying their premiums, they will form some sort of a relationship with their insurer. When they really need the insurer, they reason, the payout will be made without quibble.

This may well be the case but, in the meantime, they are likely to be hit with rising payments because they are "inactive" consumers, to the extent that they are being penalised for their constancy.

Take the case of 83-year-old Maurice Henderson, featured in The Guardian last month, whose daughter, Elaine, worked out that he had paid £3,500 more than necessary to Royal Sun Alliance (RSA) by renewing his buildings and contents insurance each year.

Mr Henderson had been with Royal Sun Alliance since 1951. His most recent renewal quote for a two-bed bungalow in Clowne, near Chesterfield, was £648, four times a quote of £161 gleaned by his daughter from RSA's online subsidiary, More Than.

RSA reviewed the case and decided the policy was "correctly priced". "It dates back to the 1950s, at this time the method for calculating premiums was far less sophisticated than it is now," a spokesman said, adding that the new quote was actually for a different product.

"I should have known better, I suppose," said Mr Henderson. "But I trusted the company and assumed, wrongly, as it turned out, that they would look after their loyal customers."

Other forms of insurance follow a similar pattern, with companies slowly increasing premiums that become more uncompetitive by the year. Savers, too, find that new accounts with attractive interest rates start dropping down the table of best-buys. The same process happens to credit-card customers who switch to take advantage of interest-free periods.

In energy, loyalty is for the naïve. Households that have stayed with the same electricity board or gas supplier since privatisation two decades ago are almost certainly squandering hundreds of pounds a year.

Disloyal customers pay the least. The savvy who have access to the internet (which is not available to all, particularly pensioners) hop on to the cheapest tariff, which naturally becomes less attractively priced over time.

Still with your first broadband provider? You're probably on a slower rate than you need to be. Been with your phone company for a few years? You're probably paying too much.

There are a few exceptions to the consumer loyalty rule. Banks, including Abbey, are now giving loyal mortgage customers a free current account. High-street retail chains offer loyalty cards that give money back for purchases, although the small percentage returned comes at the price of a loss of privacy.

In some ways, it's hard to blame companies for wanting to maximise their profits. Charging uncompetitive rates to loyal customers, however elderly or confused, presumably pays.

One way to ensure you are on the best rate possible is to review your standing bills once a year. The internet has transformed the once tedious task of ringing round insurance companies for quotes. Price comparison sites such as do a good job.

The Independent also offers a comparison service – compare. – which offers £25 off insurance quotes. Don't use these sites once. Keep coming back. Again and again and again.

Heroes & Villians

Heroes: Bulldog

Men can now moisturise safe in the knowledge that no fluffy animals were harmed in the making of the product they are using. The butch-sounding skincare brand is the first male-grooming company to carry the cruelty-free logo of the British Union for the Abolition of Vivisection (BUAV). The Humane Cosmetic Standard's leaping-bunny logo is absent from most cosmetics products.

BUAV's chief executive, Michelle Thew, said: "The BUAV's leaping-bunny logo is the absolute gold standard in cruelty-free products and we applaud Bulldog for taking this important step to prove its cruelty-free retailer status." Quite right. Well done, Bulldog.

Villains: Maclaren

1. The buggy manufacturer contacted all US customers offering them safety patches to prevent their children's fingers getting stuck in hinges.

2 Maclaren refused to do the same in the UK, saying there was no evidence of similar level of accidents

3. It did a U-turn, offering the patches to UK customers but only if they contacted the firm

4. Faced with potential legal claims from 15 families, averaging about £5,000 each, Maclaren is denying liability, prompting more damaging headlines.

Ostrich. Head. Sand?