New car and home insurance rule could cap how much customers pay at renewals

The Financial Conduct Authority has announced insurance renewals will not be more expensive for existing customers.

It comes after an investigation found 6million policy holders would have saved £1.2billion if they paid the average price for their risk.

Many firms have been increasing prices for existing customers each year at renewal, known as "price walking".

It means customers have to shop around and switch each year to avoid paying higher prices for staying with the same insurer.

Many firms offer below-cost prices to attract new customers.

Now the FCA's new rules will stop firms from "price walking" their loyal customers.

Insurers will be required to offer renewing policy holders a price that is no higher than what they'd pay as a new customer.

It said these measures will save consumers a whopping £4.2billion over 10 years.

In addition to the new rules, the FCA is also bringing in new rules to give consumers easier methods of cancelling their renewals.

Sheldon Mills, executive director at the FCA, said despite the measures, customers should still be proactive when the contract is up.

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He said: "These measures will put an end to the very high prices paid by many loyal customers.

"Consumers can still benefit from shopping around or negotiating with their current provider – but won't be charged more at renewal just for being an existing customer.

"We are making the insurance market work better for millions of people.

"And 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."

The pricing, auto-renewal and data reporting remedies will come into effect on January 1, 2022.

Matthew Upton, Director of Policy at Citizens Advice, said the measures will encourage firms to "do the right thing".

He said: "It's more than two years since we submitted our super-complaint on the £4 billion-a-year loyalty penalty paid by consumers across the mortgages, savings, mobile, insurance and broadband markets.

"We're pleased to see the FCA setting the bar so high in stamping out this systematic scam, and we now need to see similar action in the other markets."

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He added: "No longer will loyal insurance customers face price-walking – gradual year-on-year increases – that can leave them paying way over the odds.

"Instead firms will have to do the right thing and offer them the same deal as a new customer.

"For us, and those loyal customers, this fix cannot come soon enough."

Back in March it was announced the new changes would be delayed.

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