Consumers who renew their motor or home insurance policy cannot be charged more than new customers when rule changes introduced by watchdog the Financial Conduct Authority (FCA) take effect on January 1, 2022.
Currently, renewal quotes for existing customers may be significantly higher than prices offered to new customers, who are typically offered the better deals. However, the new rules, which affect car, motorbike, van and home insurance premiums, are intended to crack down on this practice, ending the so-called ‘loyalty premium’. They will mean that premiums charged to all renewing home and private motor insurance customers by their insurance provider cannot be greater than the price they would charge to an equivalent new customer for the equivalent policy.
The FCA estimates the rule changes will save consumers £4.2 billion over 10 years.
At the moment, the difference between the prices new customers are offered compared to existing customers can sometimes run into hundreds of pounds. According to comparison site Comparethemarket.com, new customers who switched providers at the point of renewal paid, on average, £262 less for car insurance and £113 less for home insurance than policyholders who stayed with their existing insurer over the past 12 months. In total, someone who auto-renewed both policies could be paying £456 more for their insurance than those who shopped around, and switched to a cheaper deal.
Consumers urged to shop around now for cover
The new rules make it more important than ever to shop around for insurance cover if your policies are up for renewal in the next few weeks, as from next year, savings from switching are likely to shrink.
James Dalton, director at the Association of British Insurers, the trade body for the insurance sector, said: “We support these reforms, and are pleased that the FCA has acted to bring them in across the home and motor insurance markets. While the FCA recognises that these changes could lead to price rises for some who shop around regularly, all customers should get fairer outcomes in the UK’s competitive home and motor insurance markets.
“These are very significant changes and insurers will work with the FCA to ensure as smooth as transition as possible for their customers.”
You can compare car insurance quotes or home insurance quotes today, or if your insurance isn’t up for renewal just yet, let us know your renewal month here and we can send you a reminder nearer the time.
Find out more about how to cut the cost of car and home insurance in our articles 10 practical tips to reduce your car insurance premiums, and Your essential guide to home insurance.