The UK’s financial watchdog has decided to end so-called loyalty penalty on home and motor insurance, following years of complaints.
The Financial Conduct Authority (FCA) has outlined a new set of rules which bars insurers from collecting higher premiums from customers who automatically renew policy.
The new rule requires insurance companies to ensure that renewal quotes for home and motor insurance consumers are not more expensive than they would be for new customers.
The regulator estimates that six million loyal policy holders would have saved £1.2bn in 2018 had they paid a market price for their actual risk.
The FCA added that the new measures will help customers save £4.2b over a decade and will help the market work better.
FCA executive director for consumers and competition Sheldon Mills commented: “These measures will put an end to the very high prices paid by many loyal customers. Consumers can still benefit from shopping around or negotiating with their current provider – but won’t be charged more at renewal just for being an existing customer.
“We are making the insurance market work better for millions of people. We will be watching closely to see how the market develops in the future and to ensure firms continue to deliver fairer value to consumers.”
In addition to the clampdown on price walking, the FCA also plans to bring rules to give consumers easier ways to cancel automatic policy renewal.
The insurers are now also required to evaluate more options to offer fair value to their clients.
Furthermore, home and motor insurance firms are also mandated to report data to the FCA, which will use it to oversee the market more effectively.