Struggling Saga doesn't deserve its customers' trust

The company, which sells inusurance and travel to the over 50s, has lost money and been forced to change its strategy amid a mounting scandal over the "loyalty penalty" imposed on insurance customers

Saga sells travel and insurance to the over 50s. It's the second of those that has soured the company's journey (Getty)

An unhappy story from Saga, which this morning reported a thumping loss and tore up its previous strategy.

It’s an open question as to who should feel more annoyed at what’s emerged: customers or investors.

The latter have grounds for feeling deeply unhappy. Saga sells travel and insurance to the over 50s, which ought to put it in a sweet spot given this country’s ageing population.

But the shares have been left languishing at less than half the price they floated at four years ago, and at barely a third of their peak.

It’s surely in need of a hip replacement. The insurance business requires more drastic surgery still.

Which brings us to those customers. Saga has a powerful brand among its core demographic. The way it has operated the business suggests its undeserved.

The company has sought to draw customers in by offering low prices before pumping them up in the second and third years and hoping they won't notice.

It’s a shabby practice, one that was called out by Citizens Advice in a super complaint to the Competition & Markets Authority concerning the ‘loyalty penalty’ imposed on bill payers who stick with the suppliers of a range of services rather than switching.

It’s true, as was pointed out to me this morning, that it isn’t just Saga that’s at fault here. Much of the industry does the same thing.

However, that’s no excuse, particularly for a business that trumpets “one of the most recognised and trusted brands in the UK”.

This is supposed to be the company that will look after your grandparents because it understands them. The fact that it hasn't been doing that makes the kicking it has been getting richly deserved.

Saga plans to address the issue with the launch of home and motor insurance products with a three year fixed price offer, just so long as its customers don’t claim within that period.

“The significance of this change should not be under estimated in today’s insurance market,” said CEO Lance Batchelor who described the change to his previous (failed) strategy as “bold and fundamental”.

Saga’s 2.1m customers would really be best off saying something like, “tell you what, I’m only going to sign up after using a price comparison website to see if there’s anything better around, and I’m going to keep on using one from now on”. Here’s hoping some of the silver surfers do that. Saga doesn’t deserve their loyalty.

In the meantime, it’s written down the value of its insurance business by £300m, a decision that sent its full year results plunging into the red, and slashed its dividend.

Hey! Maybe this does mean a better deal for its customers after all.

If investors are unhappy at being told they're going to get less from now on, well they know who to blame. A new strategy is clearly what this business needs. But there’s an equally strong argument that it needs a new CEO too.