Have you ever noticed your insurance premium creeping up every year, even when you renew with your existing insurer? Known in the business as price walking, it means that consumers have to shop around and switch insurer every year to avoid paying higher prices for being loyal.
It also distorts the way the market works for everyone. Many firms offer below-cost prices to attract new customers. They also use sophisticated processes to target the best deals at customers who they think will not switch in the future and will therefore pay more over the lifetime of the policy.
Luckily this doesn’t apply if you’re a customer of Asprey Harris as they already do the shopping around for you and only suggest policies which offer you the best possible terms, something they’ve been doing for the past 25 years.
For many insurance seekers, however, renewal time becomes a trade off between the hassle of searching for a new provider or taking the easy route and paying over the odds for continuing their existing cover.
Now there is some good news for them too.
The Financial Conduct Agency (FCA), who oversee the insurance industry, have brought in new rules to stop firms price walking. Under these rules insurers will be required to offer renewing customers a price that is no higher than they would pay as a new customer. It is likely that the practice of offering unsustainably low-priced deals to some customers will also be discontinued.
Under these new rules the FCA estimates that these measures will save consumers £4.2 billion over 10 years, by removing the loyalty penalty and making the market work better.
The pricing, auto-renewal and data reporting remedies come into effect on 1 January 2022. The rules on systems and controls, product governance and premium finance take effect from the end of September 2021.
In addition to this the FCA is also bringing in new regulations to:
- give most consumers easier methods of cancelling the automatic renewal of their policy
- require insurance firms to do more to consider how they offer fair value to their customers
- require home and motor insurance firms to report data to the FCA so that it can supervise the market more effectively
The FCA will continue to monitor the market closely to ensure firms are ready to implement the pricing changes on time. They will also review the effects of the remedies over the course of 2022, ahead of a full evaluation in early 2024.