FCA tells home insurers to give loyal customers better deal
The Financial Conduct Authority will block general insurers from automatically increasing prices and charging existing customers more than new ones in a move that could save consumers more than £1bn a year.
The City regulator will ban "price walking" from the start of 2022. This practice has led insurers to raise prices for household and motor policy holders, forcing them to shop around. Insurers also offer new customers prices at below cost and target the best deals at customers less likely to switch in future, the FCA said.
From 1 January insurers will be required to offer renewing customers a price no higher than they would pay as a new customer. This means insurers are unlikely to offer unsustainably low-priced deals to some customers.
The FCA found in 2020 that millions of insurance customers lost out if they stuck with their existing provider. In 2018 six million customers would have saved £1.2bn if they had paid the average price for their risk, the watchdog said.
Sheldon Mills, the FCA's head of consumer and competition policy, said: "These measures will put an end to the very high prices paid by many loyal customers. Consumers can still benefit from shopping around or negotiating with their current provider - but won't be charged more at renewal just for being an existing customer."
Mills said insurers would also be required to make it easier to cancel automatic policy renewals, do more to offer fair value and report to the FCA so it can supervise the market more effectively.