Move to end rip- off insurance renewals
HOME and motor insurance customers should pay no more when renewing their policy than they would if they were new to their provider.
The proposals from the Financial Conduct Authority ( FCA) would apply through the same sales channel, such as buying the policy online.
Firms would be free to set new prices but would be prevented from gradually increasing the renewal fee over time – known as “price walking” – other than in line with a individual’s risk.
Ten million policies across home and motor insurance are held by people who have been with their provider for five years or more.
New customers pay on average £ 285 for their car insurance while those who have been with their provider for over five years pay £ 370, according to a study by the FCA based on typical risk. And those taking out buildings insurance are offered £ 130 to be a first- time customer while people who stay loyal can expect to pay £ 238.
The City regulator estimates its proposals will save people £ 3.7billion over 10 years. Christopher Woolard, interim chief executive of the FCA, said: “We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in future and put an end to the very high prices paid by some long- standing customers.
“The package would also ensure that firms focus on providing fair value to all their customers.”
The FCA set out a package of proposed remedies to help ramp up competition between providers, as it published the final report of its market study into the pricing of home and motor insurance. The regulator is also consulting on other new measures to boost competition and deliver fair value to all insurance customers.
These include product governance rules requiring firms to consider how they offer value to all insurance customers over the longer term.
Dame Gillian Guy, chief executive of Citizens Advice, said: “We’re pleased to see the FCA is proposing strong action to crack down on this systematic scam. We’re especially happy to see it tackling price walking – gradual year- on- year price increases – and making companies automatically switch their customers to better deals.”