Britain’s financial regulator said on Friday it will move to protect consumers from so-called loyalty penalties in motor and home insurance, potentially saving an estimated 4.2 billion pounds ($5.95 billion) over 10 years.
The Financial Conduct Authority (FCA) said in a statement it would set new rules to ensure consumers renewing quotes for home and motor insurance are not charged more than new customers.
Many insurers increase prices for existing customers each year when they renew policies. The practice, known as “price walking”, means consumers must look for new deals and switch providers every year to avoid higher prices.
“It is likely that firms will no longer offer unsustainably low-priced deals to some customers,” the FCA said.
The FCA will also bring in new rules so consumers can more easily cancel automatic policy renewals and require insurers to look more closely at how they offer fair value for consumers. It will also require home and motor insurance firms to report more data to the regulator.
The Association of British Insurers (ABI) welcomed the FCA announcement and said it supported the reforms and would work closely with the watchdog to implement them.
“It is vital that the new rules are applied across the whole insurance market, including price comparison websites and insurance brokers, with a uniform level of supervision and monitoring by the FCA, to ensure good customer outcomes,” said Charlotte Clark, director of regulation at the ABI.
New rules on systems and controls, product governance and premium finance will take effect from the end of September, with the rules on pricing, auto-renewal and data reporting starting from 2022.
Six million car and home insurance policyholders paid high prices in 2018 in the 18 billion pound market, the watchdog said in 2019. If they had paid the average price for a policy, they would collectively have saved 1.2 billion pounds.