What is changing and why?
From 1 January 2022, new pricing rules introduced by the industry’s regulator, the Financial Conduct Authority (FCA), will come into force. The changes will mean that when existing home and private motor insurance customers renew their insurance policy, the price charged by the insurance provider cannot be more expensive than the price that they charge to an equivalent new customer for the equivalent policy.
We welcome and called for these changes that will remove excessive price differences in the premiums paid by some new and existing customers for the same policy.
Insurers could not have made these changes alone, as people buy their home and motor insurance from different sources, not just from insurers. This is why we had asked the Regulator to act to ensure that these rules apply whether you buy your home or motor insurance from an insurer, insurance broker, price comparison website or a retailer, such as a shop.
It is important to remember that, as the Regulator has acknowledged, “We expect that our remedy package will probably lead to some consumers paying higher prices if they currently benefit from significant new business discounts as inducements to switch.” (FCA Market Study, September 2020).
In the same report they also point out that: “Regular switchers gain and can potentially sustain low (even below cost) average prices, while customers who do not search or negotiate pay higher prices on average and so cross-subsidise the switchers. Our proposed remedy would eliminate this cross subsidy and so may lead to higher prices for regular switchers.”
Read on below to find out how these important changes will affect you, and what you need to consider when renewing your current home and motor insurance, or shopping around for new cover.
