Entry into force of the ban on insurance companies quoting higher renewal premiums
From January 1, insurance companies will no longer be allowed to offer customers a higher price for renewing their home or auto insurance than they would pay if they were a new customer, the report said. UK financial watchdog.
The Financial Conduct Authority (FCA) estimates this will save consumers £4.2 billion ($5.6 billion) over the next 10 years.
“Our interventions will make the insurance market fairer and work better,” said Sheldon Mills, executive director, consumers and competition at the FCA, adding: “insurers can no longer penalize consumers who stay with them.” .
He said consumers can still shop around and negotiate a better deal, but won’t have to switch just to avoid being charged a loyalty bonus.
The new rules come after the FCA discovered that many insurers were raising prices to renew customers year on year – a practice known as ‘price walking’.
This not only means higher prices for loyal customers, but, according to the FCA, distorts the functioning of the insurance market.
Sarah Coles, Senior Personal Finance Analyst, Hargreaves Lansdown (HL.L) said the price walk is “where you’re given a cheap deal to tempt you, and then every year your renewal gets more and more expensive.”
She said the new regulations are “good news for those who stick with one provider, but it will likely mean the end of super cheap deals for those willing to keep switching.”
The regulator said any business that is unable to implement the technical changes needed to comply with the new rules by January 17 will need to make sure consumers don’t lose out.
The FCA’s new package also includes rules to give consumers easier methods to cancel automatic renewal of their policy and to require insurance companies to demonstrate that their products provide fair value to customers.
Home insurance premiums have fallen over the past year after being squeezed by the pandemic and an ongoing “price battle” on comparison websites, a recent Consumer Intelligence study showed.
Premiums have fallen to an average of £138, representing an 8.2% drop over the past 12 months, as the pandemic forced people to spend long periods at home at the start of the year. This meant that burglars were less likely to break in and owners were quick to fix issues such as water damage.
Meanwhile, EY’s UK car insurance results from earlier this year revealed that car insurance premiums are expected to be 6% lower this year than in 2020 as the pandemic has led to a change in car usage patterns and a drop in the number of complaints.
Watch: Simple tips for budgeting when you leave the house