There’s always a sneaking suspicion from Insurance customers that they are overcharged for car or home insurance renewal. It is now clear that insurers have been charging their loyal customers a higher premium year on year compared to those who are new to them; which is known in the insurance world as a loyalty penalty or price walking. The Financial Conduct Authority (FCA), who are the regulators of the insurance world, will be putting a ban on these loyalty penalty which is estimated the save insurance customers around £4 billion in premiums over the next 10 years.
The measures will be implemented in January 2022 and will mean existing customers must be offered a renewal price that is no higher than they would pay as a new customer.
Currently most insurers offer their lowest prices to new customers and then increase their pricing year on year, hitting those who remain loyal with the same provider hardest.
This means that consumers who shop around every year may end up paying more as they will no longer benefit from insurer’s current enticing deal. However, the new rules will not prevent insurers from increasing premiums if a customer’s risk changed over the period they are insured or if the insurer changes its pricing margins.
The FCA is also proposing that insurers must make it clearer to customers that there is an extra cost to paying monthly rather than annual premiums to make additionally sure they are NOT overcharged for car or home insurance.
Insurers will also no longer be able to automatically renew customers’ policies and will need to make it easier to give customers a choice of cancelling by phone, online, post or by email. Added together with all of the other measures, the weight of protecting the customer is now on the Insurance industry to make sure it is, NOT overcharging for insurance.
All these changes means that the playing field will become fair again and hopefully move customers away from price to value for money and the importance of having the right cover in place.
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