Insurance boost for loyal customers

Motor and home insurance customers will stop paying a "loyalty penalty" when their deal comes up for renewal this year.

New rules – which came into force on January 1 – mean insurers will be required to offer renewing customers a price that is no higher than they would pay as a new customer.

But the new regulations mean that those who regularly shop around for a cheaper deal – often younger customers – could end up paying more, with discounts potentially becoming smaller.

Many firms have increased prices for existing customers each year at renewal in a practice known as "price walking" and industry regulators found that millions of customers were being unfairly charged higher prices – an extra £1.2bn in 2018 alone.

The Financial Conduct Authority (FCA), which has introduced the measures, has said they are likely to bring an end to unsustainably low-priced deals to some customers but, overall, people will save £4.2bn over 10 years.

Sheldon Mills, executive director, 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."

The Association of British Insurers says it believes firms will still be able to offer competitive deals to new customers, with a range of different policies.