You could soon be protected against price hikes when renewing insurance
Renewing car or home insurance policies can cost more than expected at times, especially when prices increase over time.
However, the Financial Conduct Authority (FCA) has now said that existing customers should not have to pay more when they renew a car or home insurance policy than if they were a new customer.
Existing customers charged same as new customers
Changes to the renewal system would mean that if you bought the policy online, you will be charged the same price as a new customer also buying online.
Ten million policies across home and motor insurance are held by people who have been with their provider for five years or more, but in 2018, the FCA identified six million policyholders were paying high or very high margins.
Alongside this, the Competition and Markets Authority (CMA) estimates that increasing prices for existing customers costs policyholders £1.2 billion a year.
The FCA is now planning a package which would make sure that companies cannot charge customers who are renewing their policies any more than new customers.
FCA interim chief executive, Christopher Woolard, said, "We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in future, and put an end to the very high prices paid by some long-standing customers.
"The package would also ensure that firms focus on providing fair value to all their customers. We welcome feedback on the proposals."
Citizens Advice chief executive Gillian Guy said, “It’s nearly two years since we submitted a super-complaint on the loyalty penalty and we’re pleased to see the FCA is proposing strong action to crack down on this systematic scam.
“We’re especially happy to see it tackling price-walking - gradual year-on-year price increases - and making companies automatically switch their customers to better deals.
“It’s important to remember these are proposals and have an introduction date of late 2021 which is a long way away. It is essential that the FCA confirm and implement these quickly to potentially bring insurance customers' prices down by £370 million a year.”
Addressing what these proposed changes would mean for car insurance customers, James Blackham, CEO of insurer By Miles, said, "The loyalty penalty takes advantage of time-poor, trusting and often vulnerable consumers. These measures, when in place, will finally offer consumers protection at a time when it is needed most. And they will help restore trust, transparency and fairness to the insurance industry.
"The FCA must now act quickly to put these new rules in place to end ‘price walking’ and the loyalty penalty for good.”
Other proposals being made
The FCA is also looking at other ways it can help to make sure customers get a fair deal with their insurance policies, including making it simpler to stop automatic renewal across all general insurance products, and new rules which would tell firms to report certain data sets to the FCA, so that it can then check the rules are being followed.
Insurers and consumer groups have until 25 January 2021 to respond to the proposals, with the final rules to be published early next year.