Martin Lewis: New rule from January 1 could see costs rise for drivers and homeowners

Customers with car and home insurance do not pay a “loyalty penalty” if their contract is extended from January 1st.

New rules mean that insurers must offer their new customers a price that is no higher than they would pay as a new customer.

But those regularly looking for a cheaper deal, often younger customers, might end up paying more, with the discounts potentially getting smaller.

Many companies have increased prices for existing customers each year to renew in a practice known as price walking. This has distorted the market as new customers may have been offered lower prices by companies to attract them and then over time paid more when they renewed their insurance.

Regulators have found millions of customers wrongly being billed higher prices, including an additional £ 1.2 billion in 2018 alone.

The website’s founder, Martin Lewis, previously wrote on MoneySavingExpert.com, warned: “In the short term, this change could lead to a price increase for those who switch.”

Mr Lewis wrote, “My best guess is that not only will companies lower renewal prices to match newbies – tariffs will be closer to the middle (as was the case in 2012 when insurers were excluded from gender-based pricing). This means that the savings from the switch are likely to be relatively reduced. “

Providing general tips on finding insurance on the website, Lewis said timing is important when purchasing insurance – and 23 days prior to renewal is the sweet spot for auto insurance, while for home insurance it is 21 days.

He also suggested checking at least two comparison websites; Compare these offers with Direct Line and other offers that do not contain comparison websites; check whether a multi-car policy would be cheaper; and review of cashback websites.

People could also try haggling with their existing provider and see if fully comprehensive insurance could be cheaper than auto liability insurance, he suggested. Some insurers see customers as a lower risk if they opt for fully comprehensive car insurance.

Those struggling to find coverage should also visit the British Insurance Brokers’ Association website at Insurance.biba.org.uk/find-insurance.

The Financial Conduct Authority (FCA), which instituted the measures, has announced that they are likely to put an end to unsustainably cheap deals for some customers.

But officials said a total of £ 4.2 billion will save people over 10 years.

The new rules will also make it easier for customers to cancel their auto-renewal policy, and insurance companies will have to do more to review how they are delivering fair value to their customers.

Insurers also need to send data to the FCA so that the regulator can monitor the market more effectively.

Sheldon Mills, Executive Director, Consumer and Competition at FCA said, “Our interventions will make the insurance market fairer and better. Insurers can no longer penalize consumers who stay with them. You can still shop around and negotiate a better deal, but you don’t have to switch just to avoid being billed a loyalty reward.

“We are closely monitoring how insurers react to our new regulations to ensure that consumers benefit from the benefits of a better insurance market.”

The effects of the restructuring will be reviewed in 2024.

The Association of British Insurers (ABI) believes that companies can continue to offer competitive deals to new customers on a number of different policies at different prices, although prices may go up for some who shop regularly.

Previous research by the ABI found that motorists paid an average of £ 429 for a policy in the third quarter of 2021 – a decrease of nearly £ 40 (£ 39.47) this year.

Fewer claims during the coronavirus lockdown have helped keep car insurance costs relatively low, although repair costs are under pressure.

Malcolm Tarling, spokesman for the ABI, said, “These significant rule changes mean that the price your insurance provider charges when you renew your policy cannot be higher than the price you charge for equivalent insurance.” New customer for the policy in question. These rule changes will lead to a rebalancing of the premiums between new and existing customers. “

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