FCA reforms insurance renewal rules

The regulator says the rules are expected to save consumers £4.2bn over the next 10 years, and comes after a review that uncovered that many insurers were increasing prices for renewing customers year-on-year.

As well as leading to higher prices for loyal customers, the practice - known as price walking - distorted the way the whole insurance market worked. Many firms offered below-cost prices to attract new customers, who then paid more over time if they renewed their insurance. 

Insurers also used sophisticated processes to target their best deals at customers who they thought were less likely to switch in future. 

Commenting on the reforms, the FCA’s executive director of consumers and competition  Sheldon Mills, said “Our interventions will make the insurance market fairer and make it work better. Insurers can no longer penalise consumers who stay with them.  

“You can still shop around and negotiate a better deal, but you won’t have to switch just to avoid being charged a loyalty premium. We are keeping a close eye on how insurers respond to our new rules, to ensure that the benefits of a better insurance market are delivered to consumers.”

The FCA’s package of reforms, which came into effect this month, also includes new rules to give consumers easier methods of cancelling the automatic renewal of their policy. Additionally, insurance firms are now required to demonstrate that their products deliver fair value to customers.