MOTOR insurers will very soon be banned from quoting people a higher price for renewing their policy than if they were a new customer.
The new rules are being brought in by the Financial Conduct Authority (FCA) from January 1 in a move that’s expected to save consumers £4.2bn over the next 10 years.
Its reforms, which include the home insurance sector as well, follow a review, as reported by Car Dealer earlier this year, that showed many insurers were increasing prices for customers who renewed year on year – a practice that’s called price walking.
The FCA said that as well as leading to higher prices for loyal customers, price walking distorted the way the entire insurance market worked.
Many firms offered below-cost prices to attract new customers, who then paid more over time if they renewed their insurance.
It said insurers used sophisticated processes to target their best deals at customers they thought were less likely to switch in future.
Sheldon Mills, executive director for consumers and competition at the FCA, said: ‘Our interventions will make the insurance market fairer and make it work better.
‘Insurers can no longer penalise consumers who stay with them. You can still shop around and negotiate a better deal, but you won’t have to switch just to avoid being charged a loyalty premium.
‘We are keeping a close eye on how insurers respond to our new rules, to ensure that the benefits of a better insurance market are delivered to consumers.’
The FCA’s reforms also include new rules that make it easier for people to cancel the automatic renewal of their policy, and to require insurance firms to show that their products deliver fair value.