Some customers are paying more for their home or motor insurance when they renew, compared to if they were a new customer.
The Financial Conduct Authority (FCA) has announced a proposal to make it fairer for loyal customers. The consultation, which has been launched this week, marks a significant intervention by the regulator.
The proposal suggests that if a customer bought the policy by telephone several years ago, they would pay the same premium as a customer purchasing the same product by phone today.
Insurers have been known to use complex and opaque pricing practices that allow them to raise prices for policyholders who renew with them year on year. While some people shop around for a deal, many are being penalised for being loyal.
The FCA has found that up to 6 million policyholders could be disadvantaged by the current situation and identified £1.2 billion of savings if they were to switch.
The proposal also considers other measures to boost competition further and deliver fair value to all insurance customers, including:
- Product governance rules requiring firms to consider how they offer fair value to all insurance customers over the longer term.
- Requirements on firms to report certain data sets to the FCA so that it can check the rules are being followed.
- Making it simpler to stop automatic renewal across all general insurance products.
The consultation should be concluded by 25 January 2021, which will then be followed by a policy statement and new rules next year.
There are plenty of solutions to help customers understand what cover they have in place, and its price, irrespective of how long they have held the policy.
Should you need to check that a home insurance premium is competitively priced for the type and of course contents of your home, you can always talk to us.