New FCA insurance regulations FROM 1ST JAN mean fairer home and motor insurance renewals

From 1 January insurers will be banned from quoting customers a higher price for renewing their home or motor insurance than they would pay if they were a new customer. The new rules brought in by the FCA are expected to save consumers £4.2bn over the next 10 years.

The FCA’s reforms follow a review that uncovered that many insurers were increasing prices for renewing customers year-on-year – a practice known as price walking.

Louise O’Shea, CEO at Confused.com comments:

“We are starting to see insurance companies warning drivers of pricing changes ahead of the new FCA regulations coming into effect from 1 January. Given the fact that we’ve all probably overspent this Christmas, it will be welcome news that insurers can no longer overprice renewing customers.

“But we’re also seeing a lot of people interpret this as meaning that their renewal price will no longer increase. This really is not the case, and we can understand how this is creating a lot of confusion for consumers. Here’s what the changes mean:

• Yes, insurers can no longer increase renewal prices to make up for the new customer discount you may have received. All customers must now receive the same price as if they were taking out a new policy, or renewing for the second, third or tenth year with that insurer.
  
• But, if the average cost of car insurance in the UK is more expensive at the time of your renewal compared to the previous year, then your price could increase to reflect this.
  
• Similarly, if you have made a claim, or if you have moved house or job, in fact if any of your details have changed, then your new price will be updated to reflect this, and you could see an increase.
  
• However, if you have been loyal to your insurance company for a number of years, you’re more likely to have been ‘price walked’, and when the new changes come into effect, you could see a drop in your car insurance costs. But this doesn’t mean it’s the best price for you. Always shop around to see if you can find a better deal.
  
• The average cost of car insurance is highly likely to start to increase regardless of the FCA regulations.

“In the past 12 months we’ve seen the cost of car insurance reach the lowest point in six years. And this is mostly down to the fact that people haven’t been driving as often and have been at home a lot more than usual. Now that we are returning to work or spending more time on the road, the risk of making a claim is increasing. Added to this, the fact that the costs of making repairs, replacing vehicles and taking care of individuals hurt in accidents are increasing, the overall cost of claims is going up. And this is a very important consideration for companies when calculating the cost of insurance as the more claims and claims costs they must pay out for, the more they are going to charge customers for their policies. With the expectation that claims will increase next year, the general cost of insurance could too.

“Similarly, the changes coming into effect in January could also trigger an increase in insurance costs, as companies are likely to look at how they price customers. In the past, offering a significant discount for new customers often came at the expense of renewing customers, who saw their price increase. Without this to balance out the discounts, some individual insurers may need to increase their prices to even things out.

“It’s important to remember that every insurer rates differently. And we’re also seeing a number of new entrants to the UK car insurance market and existing insurers launching new brands, which are all keen to grow. These brands are able to offer great deals for customers, as they don’t have a history of ‘price walking’ that needs fixing.

“While we don’t know how soon prices will increase, we’re confident that they will, and we all need to be shopping around to make sure we’re finding the best price and saving money where we can. Even if your circumstances don’t change, the chances are there will be an insurer that can offer you a cheaper price. We’re so sure of this, we guarantee to beat your renewal price, or give you the difference, plus £20.”