Customers who renew their home or car insurance will not be charged more than new policyholders after the financial watchdog stops companies from charging a loyalty penalty.
People who automatically renew their policy with their insurer are often charged higher premiums than new customers, who tend to offer the best deals.
The Financial Conduct Authority (FCA) found that, on average, new customers paid £ 285 a year for car insurance, while customers who had been with their supplier for more than five years were charged £ 370.
In the home insurance market, new clients paid £ 165 a year for coverage of buildings and contents, while after five years, premiums had risen to £ 287.
He said his ban on the practice of raising prices, in which insurance premiums rise naturally year after year rather than because the risk is higher, would save consumers 4.2 billion pounds over 10 years.
Approximately 10 million policies in the home and auto insurance market are in the hands of people who have been with the same provider for five years or more, and many could see their premiums drop as a result of the ban, which enters effective in January.
For customers who shop every year, it could mean the end of the cheapest deals available.
The FCA said that many insurers offered offers below cost to attract customers and used sophisticated processes to target the best offers to customers who they thought would not change in the future, so they would end up paying more.
Sheldon Mills, executive director of consumer and competition for the FCA, said: “These measures will end the very high prices that many loyal customers pay.
“Consumers can still benefit from comparing or negotiating with their current provider, but they will not be charged more on renewal just for being an existing customer.”
The ban follows a super complaint from consumer groups about loyalty penalties paid by customers in the mortgage, savings, mobile phone, insurance and broadband markets.
Matthew Upton, policy director for one of the groups, Citizens Advice, said: “We are pleased to see that the FCA is setting the bar so high to end this systematic scam and now we need to see similar action in the other markets.
“Loyal insurance customers will no longer face price drops (gradual increases from year to year) that can leave them paying above the odds. Instead, companies will have to do the right thing and offer them the same treatment as a new customer.
“For us, and for those loyal customers, this solution cannot come soon enough.”
Gareth Shaw, Which? Money chief, said: “For too long, insurance companies have employed strict pricing tactics to entice customers before hitting them with exorbitant price increases and exorbitant premiums, so that’s right. that measures will eventually be introduced to help end these unfair practices. “
Shaw asked the FCA to do more to see if there are other practices in the insurance market that should be banned.
Mills said the FCA was “making the insurance market work better for millions of people” and would be “closely watching how the market develops in the future and to ensure that companies continue to offer fairer value to consumers. “.
George is Digismak’s reported cum editor with 13 years of experience in Journalism