Insurance giants are warned to end rip-offs that penalise the loyal

“Customers who prefer to stay with one provider are at risk of being hit with vastly overpriced premiums when little has changed in the service they receive. It’s right that the regulator tackles this sector to ensure customers aren’t punished for their loyalty and that pricing is clear and transparent across the industry.”

The FCA said it expects firms to look after the interests of all customers whether they are new or longstanding.

The regulator, which has written to insurance chief executives, has also identified potential non-compliance by some firms with its rules on transparency when policies come up for renewal.

And it has warned that it will intervene if insurance companies do not treat customers fairly.

Where it has concerns about conduct by firms, the regulator says it will explore all options to address this using the full range of its powers. FCA chief executive Andrew Bailey said: “Our initial work has identified a number of areas of potential consumer harm. We want to make sure that general insurance markets deliver competitive and fair prices for all consumers.

“This market study will help us examine the outcomes from general insurance pricing practices and inform how, if necessary, we should intervene Do not assume any one company is the cheapest

Do not ignore local and regional insurers as smaller firms often have good customer satisfaction ratings and cheaper rates to improve the market. If change is needed to make the market work well for consumers, we will consider all possible remedies to achieve this.”

Mr Bailey said the market study will give the FCA a deeper understanding of the scale of any harm to consumers.

There are concerns that some pricing practices could potentially disadvantage some consumers significantly.

General insurance generates more than £78billion in premiums for UK insurers. Home and motor policies are the most commonly held products where more than 80 per cent of adults have one or more general insurance policies.

Hugh Savill, of the Association of British Insurers, said: “We agree that the market is not working as well as it should for some long-standing customers.”