The Financial Conduct Authority has banned car insurers from quoting existing customers a higher price for their renewal than new customers. The ban came into force on 1 January 2022.
It follows a review that found many insurers were increasing car insurance prices for existing customers year-on-year. The practice is known as ‘price walking’.
The FCA predicts the ban will save car insurance consumers £4.2bn over the next decade.
“Our interventions will make the insurance market fairer and will make it work better,” said the FCA’s Sheldon Mills. “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.”
Below-cost distortion
Price walking distorted the car insurance market by attracting new customers with below-cost prices.
They then paid more over time when they renewed their insurance.
Insurance companies, adds the FCA, used sophisticated processes to target the best deals at customers they felt would be less likely to switch in the future.
Other new rules that have come into force include giving customers easier methods of cancelling the automatic renewal of their insurance policy.
Car insurers must now also be able to demonstrate to customers that their products deliver fair value.
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