The Financial Conduct Authority has been looking into the car insurance market – and concluded it is ‘not working well for consumers’.
The insurance watchdog has now outlined proposals to remedy this.
‘Significant reform’ is needed to enhance competition, ensure consumers receive fair value and increase trust in the marketplace.
A key proposal is for consumers renewing their car insurance to pay no more than they would if they were new to the provider.
The FCA says such a change would have saved six million policyholders £1.2 billion on car insurance during 2018 alone.
The practice of ‘price walking’ sees insurers gradually increase the renewal price to consumers over time. Such ‘complex and opaque’ processes have been criticised by the FCA.
‘While some people shop around for a deal, many others are losing out for being loyal.
‘Firms target price increases on consumers who are less likely to switch and use practices that make it harder for people to leave,” says the FCA.
The watchdog also wants to make it easier for consumers to cancel auto-renewals for insurance.
FCA interim chief executive Christopher Woolard said the organisation was now consulting on a “radical package that would ensure firms cannot charge renewing customers more than new customers in the future”.
It would “put an end to the very high prices paid by long-standing customers”.
The changes would also help improve competition within the car insurance industry – ultimately saving money for all motorists.
FCA number-crunchers estimate the proposed package of changes could save consumers, including car insurance customers, £3.7 billion over 10 years.
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