Car insurance companies banned from charging loyal customers more

A significant reform of car insurance rules to make sure all consumers pay fair prices has been introduced by the Financial Conduct Authority (FCA), which regulates the industry. 

From the start of 2022, existing customers who renew their motor or home insurance policies will pay no more than they would if they were a new customer buying in the same way. New FCA rules ban insurance companies from gradually increasing the renewal price they offer over time (known as 'price walking'), although they can still increase the cost in line with changes to a customer’s risk profile. 

While some people shop around for a better deal when their car insurance is due for renewal, many don’t – and until now they have ended up paying higher premiums for being loyal. When the regulatory body investigated car and home insurance policies in 2018, it discovered that six million policyholders paid high or very high margins that cost them collectively £1.2 billion. 

The FCA also found that 10 million home and motor insurance policies were held by customers who had been with the same provider for more than five years. The organisation estimates that the introduction of the new rules to protect consumers from having to pay an ‘insurance loyalty premium’ will save car and home insurance customers £3.7 billion over 10 years.

Although this is good news for many consumers, the downside is that the 40% of car owners who look to get the best deal possible by switching insurer each year are likely to face higher premiums, or at least won’t be able to save as much as before. That's because insurers are increasing prices across the board to claw back some of the revenue that will be lost on automatic renewals.

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