Those who renew their home or car insurance will pay less, just like new customers, starting in January.
The new rules have been confirmed by the city’s regulator, the Financial Conduct Authority (FCA), following years of complaints.
The move will save loyal customers an estimated £ 4.2 billion over a decade, the FCA said.
However, it acknowledged that it could put an end to the cheapest deals for new customers.
Regulators have sought to change the rules to prevent “price fluctuations,” in which insurance prices rise with each renewal, even if the level of risk has not changed.
“These measures will put an end to the very high prices paid by many loyal customers,” said FCA’s Sheldon Mills.
“Consumers can still benefit from shopping and negotiating with current providers, but they will not be charged an additional fee at the time of renewal just because they are existing customers. . “
This follows complaints from consumer groups that loyal customers are paying unnecessarily.
Impact of rising prices on you
So-called price walking means that a customer receives more claims each year by staying at the same insurance company, even if the customer’s risk is not so great.
The FCA gives an example of a new home insurance customer usually paying £ 130 as a one-year premium.
However, if you have the same insurance policy and have been with the same insurance company for 5 years, the annual premium will increase to £ 238.
According to the FCA example, new car insurance customers will pay £ 285 and users with more than 5 years will pay £ 370.
Following strong complaints from Citizens Advice, the FCA aims to address loyalty penalties that are the result of the growth and encouragement of shopping for better deals in insurance, overdrafts and utilities. ..
Those who switch will get the best deals as new customers. Those who remain loyal will be charged more.
A total of 10 million home and car insurance policies are held by people who have been with the provider for more than 5 years.
Among those who faced diminished loyalty was Mike Noon from Manchester. He retired after running a fruit and vegetable stall with his wife for 16 years.
“In retrospect, running a small business like us was all time consuming and tended to slip things at home,” he said.
He received a quote for a car insurance renewal with a 20% increase in price.
“One of my daughters said,’Dad, you really have to go to the internet and find better quotes than that.’ So I did,” he said. I did.
He changed providers because he challenged an insurer that didn’t compromise on price.
“Systematic fraud”
Charities said others may not be able to switch so easily. They said the problem was more serious for very low-income people who may not have the skills to search for the cheapest deals, or for those who find it difficult to calculate.
“We are pleased that the FCA has set very high standards to eradicate this organized fraud. Now we need to take similar steps in other markets,” said Citizens Advice Policy Officer. Director Matthew Upton said.
The FCA also requires that new rules be introduced to make it easier for consumers to cancel automatic renewals of insurance policies, and that insurers should consider more closely how they can provide fair value to consumers.
Home and car insurers are also required to report more data to regulators.