This week, the Financial Conduct Authority (FCA) announced new measures to stop home and motor insurance customers from getting charged more when renewing their policies with the same insurance providers.
The FCA said that many firms increased prices for existing customers during renewal in a practice known as price walking. If customers wanted to save, they would have to shop around and switch every year.
But it’s not just loyal customers who are losing out, the entire insurance market is being distorted as below-cost prices are often being used by firms to attract new customers and “sophisticated processes” are being used to “target the best deals at customers who they think will not switch in the future and will therefore pay more”.
As part of the new measures, some of which will begin from October 2021 and some from January 2022, renewal quotes for home and motor insurance can no longer be more expensive than they would be for new customers.
Insurance providers must also make it easier for customers to cancel automatic renewals.
The new rules have been introduced after the FCA found in a market study from last year that millions of home and motor insurance customers were losing out by renewing their insurance year after year with the same providers.
The FCA believes that these new measures will likely mean that the low-price deals currently offered, which it describes as unsustainable, may start to disappear. However, it estimates that consumers will save £4.2 billion over 10 years in the process.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “These measures will put an end to the very high prices paid by many loyal customers. Consumers can still benefit from shopping around or negotiating with their current provider – but won’t be charged more at renewal just for being an existing customer.
“We are making the insurance market work better for millions of people. We will be watching closely to see how the market develops in the future and to ensure firms continue to deliver fairer value to consumers.”
Until the new measures come into effect though, you should double check whether you can get the same cover cheaper elsewhere instead of renewing.