New rules will stop insurers charging loyal customers more
Car insurance companies will no longer be able to charge existing customers more than new ones from January 2022...
Reforms to the way car insurance renewals are dealt with have been announced by the Financial Conduct Authority (FCA). The aim is to improve competition and protect customers from loyalty penalties – potentially saving drivers billions of pounds.
Research carried out by the FCA in September 2020 revealed that consumers were being overcharged by £1.2 billion a year because many insurers put up premiums for existing customers every 12 months.
The increases – known as ‘price walking’ – offset the enticingly low premiums they offer to new customers to win their business. Currently, the only way for most people to get cheaper car insurance is to switch providers every year.
If the reforms are introduced, from 1 January 2022 insurers will be required to offer renewing customers the same price they would offer to a new customer. It is likely to mean insurers no longer offer low-priced deals, but the FCA estimates that the measures will still save consumers £4.2 billion over the next 10 years.
In addition to the new rules on renewal prices, the FCA is also bringing in new guidelines to give most consumers easier ways of cancelling policies that automatically renew at the end of the term, and to get insurance companies to do more to “consider how they offer fair value to their customers”.
It will also ask for more data from car and home insurance companies so it can supervise the market more effectively. These changes will come into force from 30 September 2021.
Sheldon Mills, FCA Executive Director, Consumers and Competition, said: “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.”
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