Which? has hit out at direct insurance providers that are using marketing gimmicks such as cashback deals or bonus loyalty points in an attempt to lure customers.
Tesco announced last week that consumers who buy its level or decreasing term life insurance products will get 2,000 bonus Clubcard points, which can knock £20 off their Tesco shopping bill or be used with other Clubcard deals.
Two weeks ago, the Post Office launched a new life insurance product, underwritten by Norwich Union, which offers a £100 cash bonus to new life insurance customers who have a monthly premium over £10 and Marks & Spencer will give away £25 M&S shopping vouchers to anyone who buys its life cover.
But Which? money researcher Teresa Fritz says these are simply marketing gimmicks that will stop people shopping around.
She says: “Life insurance products need to stand on competitive premiums. If these companies want to offer those things and be the most competitive then that is fine but it is often not the case.”
A 30-year-old male non-smoker would pay £17.77 a month with Tesco for £250,000 worth of life cover over a 25-year term, according to Moneysupermarket.com. The same amount of cover with Marks & Spencer would cost £14.95 and £14.50 with the Post Office but there are at least seven companies, including AA Insurance Services, More Than and Torquil Clark, which offer significantly more competitive rates.
Moneysupermarket.com protection sales manager Emma Walker says: “Unless the product is truly like for like, then the £100 cashback is not worth it. The sad thing is that providers such as Bright Grey and Scottish Provident have bonuses within the product that are great but these will probably be passed up because consumers want instant gratification.
“The worst-case scenario would be consumers canceling a good product for an inferior product because of some Clubcard points.”