A package of remedial actions to improve competition and protect customers from loyalty penalties when renewing their home and motor insurance has been implemented by the Financial Conduct Authority (FCA). These will ensure renewal quotes are not more expensive than those for new customers.
The FCA’s September 2020 market study addressed the issues and found millions of customers lose out when renewing repeatedly with their current providers.
6 million loyal policy holders could have saved £1.2 billion back in 2018 if they had paid the average price for their actual risk.
Many firms increase their prices each year for existing customers renewing their insurance which is known as price walking, meaning consumers having to shop around and switch to avoid paying higher prices for being loyal.
Many firms are offer new customer deals to attract new customers who then do not switch in the future and end up paying more.
The FCA’s new rules will ensure insurers will be required to offer customers that renew their current insurance a price that is no higher than if they were a new customer and the FCA claims these measures will save consumers £4.2 billion over 10 years.
The new rules will also give consumers easier methods to cancel automatic renewals of their policy. Insurance firms will be required to do more to consider how they offer fair value to their customers. Firms will be required to report data to the FCA so that it can supervise the market more effectively.
The pricing, auto-renewal and data reporting remedies will come into force 1st January 2022 and rules on systems and controls, product governance and premium finance take effect from the end of September 2021.
About time - brand new customers only has been a blight on the insurance industry for years. That said, by spreading the same discount across all clients rather than new clients may mean we all pay more but at a fairer price.