The Financial Conduct Authority (FCA) has recently introduced a new rule that bans insurers from charging existing customers a higher renewal price for their home or car insurance than they would offer a new customer. An article published by the FCA explained that the new rule came into effect on 1st January 2022, after evidence showed that prior to the ban many insurers were increasing prices for loyal customers who renewed year on year, a practice referred to as ‘price walking.’

 

As mentioned in an article published by the Guardian, price walking was so prevalent in the home insurance market, that customers who renewed their policies were frequently being charged double or even triple in comparison to what they would have paid as a new customer with the same company. Additionally, many insurers were found to be using sophisticated procedures to identify and target customers who were less likely to switch in the future, attracting them with low initial prices to entice them in.

 

The FCA has stated that the ban has been put in place to help make the insurance market fairer and work better. According to the BBC news website, the FCA has estimated that the new rule will save policyholders £4.2bn over the next 10 years, however, it may result in customers who proactively seek the lowest insurance prices each year to pay more. Whilst customers are advised to still shop around, compare prices, and negotiate to get a better deal, they will not be required to switch insurers to avoid being charged a loyalty premium.

 

In addition to the new pricing rules, the FCA has stated on their website that they have also introduced new rules that make it easier for customers to cancel automatic renewal policies. As a result of the new rules coming into effect, the FCA stated that they will be closely monitoring how insurers respond to ensure that consumers are benefitting from a better insurance market.