Watchdog’s new reforms for insurance costs

New rules are to be introduced to stop car and home insurers from imposing socalled loyalty penalties on customers, the financial watchdog has announced.

The Financial Conduct Authority(FCA)saiditiscracking down on existing customers are offered quotes that are higher than new ones.

Regulators found last year that millions of customers were being unfairly charged higher prices - an extra £1.2bn in 2018 alone.

Insurers will now be required to offer renewing customersapricethatisnohigher than they would pay as a new customer.

But those who regularly shoparoundforacheaperdeal - often younger customers – couldenduppayingmore,with discounts becoming smaller and more scarce.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: "Regular switchers will pay the price. It'ssomethingwe'veseenregularly from the FCA now, where efforts to protect the most vulnerablecustomersendupcosting savvier consumers more."

The FCA admitted the changes are likely to bring an end to unsustainably lowpriced deals to some customersbut,overall,consumerswill save £4.2bn over 10 years.

Many firms increase prices for existing customers each year at renewal – a practice known as ‘price walking’.

The FCA said: "This means that consumers have to shop around and switch every year to avoid paying higher prices for being loyal while many firms offer below-cost prices to attract new customers.

"That distorts the way the market works for everyone.”

MatthewUpton,directorof policy at Citizens Advice, said: "For us, and those loyal customers, this fix cannot come soon enough."