Insurers' charges high despite competition

Charges levied by UK insurers on many of the products they sell are still not coming down, despite new rules designed to ensure greater competition, a new survey reveals.

The cost of a typical with-profits endowment policy, used alongside many mortgages, rose slightly last year and is almost 40 per cent higher than in 1990, when the annual survey by Money Marketing magazine first appeared.

Charges made on personal pensions remained the same as in 1995. Only 10-year endowments have dropped in price, to 3.1 per cent of a policy taken in annual charges in 1996, compared to 3.2 per cent the previous year.

The figures come despite attempts three years ago by the Securities and Investments Board, the City regulator, to promote price competition by forcing firms to disclose how much they charged their customers.

Money Marketing's report also shows many companies spent more to acquire new business last year than the amount they received in premiums. The average cost of new annualised business acquisition was 108 per cent of new premiums, up from 104 per cent in 1994 and the highest since records were first published.

Some companies paid out even more to write new business. Guardian, formerly known as GRE, paid pounds 49m to acquire pounds 18m of annualised business, where single premiums are calculated as 10 per cent of regular ones. This equates to 272 per cent of premiums. Eagle Star had acquisition costs of 187 per cent for its pounds 46m in annualised premiums.

The Long Weekend, page 26