New auto and home insurance rule could cap the amount customers pay on renewals
The Financial Conduct Authority announced that insurance renewals would not be more expensive for existing customers.
It comes after an investigation found that 6 million policyholders would have saved £ 1.2 billion if they paid the average price for their risk.
Many companies increase prices for existing customers each year upon renewal, which is known as the “price walk”.
This means that customers have to shop around and change each year to avoid paying higher prices to stay with the same insurer.
Many companies offer prices below cost to attract new customers.
Now, the new FCA rules will prevent companies from “tricking the price” on their loyal customers.
Insurers will be required to offer renewing policyholders a price that is no more than what they would pay as a new customer.
He said the measures will save consumers £ 4.2 billion over 10 years.
In addition to the new rules, the FCA is also introducing new rules to give consumers easier methods to cancel their renewals.
Sheldon Mills, executive director of FCA, said that despite the measures, customers should still be proactive when the contract is over.
He said: “These measures will put an end to the very high prices paid by many loyal customers.
“Consumers can still benefit from researching or negotiating with their current supplier, but won’t be charged more on renewal just for being an existing customer.
“We are making the insurance market work better for millions of people.
“And we will be closely monitoring market developments going forward and ensuring that companies continue to deliver fairer value to consumers.”
Pricing, automatic renewal and data reporting remedies will come into effect on January 1, 2022.
Matthew Upton, policy director at Citizens Advice, said the measures will encourage companies to “do the right thing.”
He said: “It has been more than two years since we filed our super-complaint over the £ 4bn loyalty penalty paid by consumers in the mortgage, savings, mobile phone markets. , insurance and broadband.
“We are delighted to see the FCA set the bar so high to stamp out this systematic scam, and now we must see similar action in other markets.”
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He added: “Loyal insurance customers will no longer be faced with rising prices – gradual increases year over year – that can make them pay far beyond the odds.
“Instead, companies will have to do the right thing and offer them the same offer as a new customer.
“For us and these loyal customers, this fix cannot come soon enough.”
In March, it was announced that the new changes would be delayed.