The FCA has introduced new rules so that loyal customers are not overwhelmed by car or household insurance when they renew.
I’m sure you go through the same thing every year, but I’ll go through it with you just in case.
A letter arrives on the doorstep stating that your car / household insurance needs to be renewed.
* Great, another bit of life admin to deal with *
So you have the choice to act now or to postpone it until the last minute.
- If you act now, it’s done. Happy Days!
- If you wait you may forget and automatically renew at the advertised price. Is that a bad thing? Probably yes!
Hope you decide to have a cup of coffee and consider your options for 5 minutes during your lunch break.
After a quick Google search (other search engines are available) you will find the same offer at a lower price.
Um … then you see the logo showing who is cheapest, and it’s the same from the company that offered you the more expensive extension!
What in the world ?!
This practice by insurance companies is known as price walking. And to avoid price increases, we all have to shop every year for a better deal.
Wouldn’t it be easy and better customer service if insurance companies just played fair?
Why don’t you just offer us the cheaper offer?
How much time and administration time would you save?
As a matter of principle, we usually get the next cheapest / best total value and then have to call the previous insurance company (because you can NEVER simply cancel online).
You will then have to waste time speaking to a person who is following a long script to try to get you to stay even though you have specifically told them that you have already bought cover elsewhere and that you have no intention of going with it to stay with them.
New protection for car and home insurance customers
Unfortunately, the Financial Conduct Authority has introduced new rules in place of insurance companies making fair deals to their loyal customers.
The FCA has confirmed that they will take steps to protect customers from the “loyalty penalty”.
One guess is that too many of their own employees were just as sick of raising the price at renewal time as the rest of the country!
The thing is, it’s not only annoying, it costs us money.
According to the FCA’s September 2020 market study, they found that millions of home and car insurance customers were paying too much when they renewed with the same provider.
Instead of renewing, these loyal customers would have saved £ 1.2 billion in 2018 if they had paid the average price instead of the renewal price.
Insurance companies will face insurance risk overload as the FCA will ensure that there are new rules in place so that loyal customers get the same deal as new customers.
The new rules will mean We all save money, but it could mean that you can’t find a more competitive offer if you compare it as a new customer.
One of the reasons you can always find a better deal is what insurance companies have to offer below the cost Prizes to attract you.
When they think they have you, they use an elaborate process to find the best deals on people they think they won’t switch in the future in order to get their money back. Even though you made a mega deal upfront, you will end up paying more.
While you may not be able to find new extremely cheap deals, the new pricing rules will still save consumers £ 4.2 billion over a 10 year period.
New rules for car and home insurance
According to the new rules, which will come into force on January 1, 2022, we will receive a better offer for the renewal of our home and car insurance.
An end to price changes
Customers who renew will be offered a price no higher than what they would pay as a new customer.
Instead of making a lengthy phone call, we have easier ways to cancel policy auto-renewal.
Although insurance companies are already designed to treat customers fairly, they need to do more to review how they are providing fair value to their customers.
You also need to report more data to the FCA so that the market can be monitored more effectively.
Commenting on the new rules, Sheldon Mills, Executive Director, Consumers and Competition at the FCA:
“These measures will put an end to the very high prices of many loyal customers. Consumers can still benefit from shopping or negotiating with their current provider – but no additional fees will be charged if they are renewed just because they are already a customer.
“We’re making the insurance market work better for millions of people. We will monitor closely how the market performs in the future and to ensure that companies continue to provide fairer value to consumers. “
Charlotte Clark, Director of Regulation at the Association of British Insurers, said:
“Insurers support these reforms and will continue to work closely with the FCA to ensure that they are effectively implemented. While the FCA recognizes that its interventions could result in price increases for consumers who shop regularly, these remedial measures should ensure that all customers get fair results from competitive insurance markets.
“It is important that the new rules apply across the insurance market, including price comparison websites and insurance brokers, with a consistent level of supervision and oversight by the FCA to ensure good customer results. As the FCA said, insurers do not make excessive profits and, as they are now emphasizing, it is likely that companies will no longer be able to offer unsustainably cheap deals to some customers.
“It will continue to be important to encourage customers to look around while ensuring competitive offers for those who stay with their insurer. When shopping, people should make sure that they are choosing the right product for their needs, considering the total value of the product, not just the purchase price. “
While the new rules mean that auto and home insurance companies are offering us a better renewal price, that doesn’t mean it’s the best overall deal.
If you receive this letter or email letting you know it is time to renew, it is still worth taking a few minutes to see if there is another provider that offers the same or better coverage at a lower price.