Halifax cuts premiums on buildings insurance
Halifax Building Society is cutting the cost of its buildings insurance policies next year by an average of 20 per cent, with some premiums falling by 60 per cent.
But the society’s buildings insurance is still not the cheapest in the market. Direct Line, the telephone insurer owned by Royal Bank of Scotland, beats Halifax in all four areas given by the society as examples of its new lower premiums.
Halifax `s insurance is underwritten by three insurers - Sun Alliance is lead insurer, with General Accident and Legal & General also providing cover. Sun Alliance’s own buildings insurance, available direct to the public, is cheaper than the Halifax version in three of the four examples quoted by the society. For a house in Aberdeen Sun Alliance charges pounds 58.50 compared with Halifax’s new charge of pounds 71.60, which is nearly pounds 20 cheaper than this year’s Halifax premium.
Halifax buildings cover is open only to homeowners with a Halifax mortgage. More than 75 per cent of its borrowers - 1.4 million out of 1.8 million - take the society’s own insurance.
The society, in common with others, used to charge pounds 25 to borrowers who wanted to choose their own insurer. This charge was dropped this year.
Peter Wood, chief executive of Direct Line, said: “This is a desperate attempt by the Halifax to slow the flood of insurance customers abandoning the building societies for the benefit of better value and better service at Direct Line. When the public realises how much the Halifax can afford to cut its home insurance premiums, it must gasp at how much it has been overpaying in the past.”
The building societies earn commission from selling insurance, but can negotiate favourable terms because of the bulk business they pass on to the insurance companies.
The public is becoming more aware of the freedom to buy buildings insurance from any source even though an “administration fee” is still the norm. Societies say they have to check policies from other insurers to ensure that they are adequate.
Halifax is introducing a no claims discount for policies renewed in 1996 following a claim-free year. It has not yet announced details of the scheme.
The society said the proportion of its borrowers taking its own insurance cover had not markedly declined.”We retain the vast majority of our insurers at renewal. This is to make sure that we remain competitive,’ a spokeswoman said.
Halifax has also refined the way it classifies properties by using the first four digits of the postcode rather than first three.