Some things we buy are not exciting. Take buildings insurance for example. We all need it but we hope that we’ll never need to claim it. Indeed, most people go through a lifetime of buying buildings insurance and never claim because the chance of a house setting on fire or falling down is really quite slim. And it is for this reason that once we buy buildings insurance, we forget it. It rolls on year after year with an automatic renewal and payment.
Only a few weeks ago one of us was confronted by a neighbour who had just bought some buildings and contents insurance for their house for less than £300 per year. Out of interest we were asked how much we were paying. It wasn’t the sort of figure that was carried in the head and so we dug into the paperwork and found that we were paying £650 - just for the buildings and with no cover for the contents. More than 30 years ago we had put the business with Direct Line. We thought Direct Line was an amazing company. It cut out the middleman and, as the name suggests, you go direct to the insurance company. Their rates were highly competitive and their service was excellent. As a result, the insurance cover we had on the house had been left to roll on and on over the years. We trusted Direct Line and there was no reason for us to look at other offers and change insurance company.
When we discovered we were paying twice the amount of our neighbour we felt we had to speak to Direct Line. We explained the situation and immediately the Direct Line agent said they could drop the price of our buildings insurance to £350. But what did this say to us? It said that we were being ripped off. We would go further and say that we were being robbed and this probably had been the case for a number of years. Okay, Direct Line might say caveat emptor, buyer beware; that it is up to us to check out the insurance and get comparative prices. However our mistake was to believe it was a trustworthy company that wouldn’t exploit our allegiance. Our loyalty to the company was such it also had our car insurances, contents insurance and travel insurance. Now we were jolted into believing that the trustworthy company was exploiting our loyalty. In fact, so angry were we that we immediately removed all our insurance business and placed it elsewhere. We received a quote for the buildings insurance from another well-known company for just £250. If we reckon that we have been paying £200 per year over the odds for the last 10 years (which seems a fairly cautious estimate) then Direct Line has stolen £2000 from us. We know this word “stolen” is heavy but that’s how it seems to us since Direct Line knew that any other customer, especially a new one, would be charged far less than us for the same policy.
This prompted us to see if there was a Net Promoter Score for Direct Line. We went to their website and found a page that promoted their Net Promoter Score with a hyperlink that said “You can see our performance over the last five years here”. When we clicked on it, it went to a page that said “404 page not found”. We next tried digging into their investors' and shareholders' publications hoping there was something on their customer satisfaction score. There was a section on the Net Promoter Score but it was given as a measure of 156 points. This we didn’t understand. The Net Promoter Score is a measure calculated by taking the percentage of people who give a score of 9 out of 10 in terms of likelihood to recommend and subtracting the percentage of people who give a score of 6 or less out of 10. In other words, the NPS is a score out of 100 so 156 meant nothing. By now we were suspicious and wondered if this weird figure was an attempt to hide something.
We know that a company has to make a profit. We fully understand the right of every company to charge a price for their products or services that reflects customers’ value or what they are prepared to pay. However, we also believe that a company has an obligation to ensure that they don’t exploit customer loyalty by taking advantage of inertia buying – rolling forward a contract which starts as good value but which turns out eventually to be very bad value. Direct Line began life in 1985 as the insurance division of the Royal Bank of Scotland Group and was the first telephone only insurance company in the UK. It has grown to be one of the largest insurance companies in the UK by good promotion and historically offering great customer service. Our concern is that, over time, a company can lose the plot and pressure on profits can cause it to take its eye off customer service. If it does, almost certainly we predict the company will thereafter lose market share.