The UK financial regulator said on Friday it would act to protect consumers from so-called ‘loyalty penalties’ in auto and home insurance, which could save around Â£ 4.2 billion (5.95 billion dollars) over 10 years.
The Financial Conduct Authority (FCA) said in a statement it would establish new rules to ensure consumers renewing home and auto insurance quotes are not charged more than new customers.
Many insurers increase prices for existing customers each year when they renew their policies. This practice, known as âprice walkingâ, means that consumers have to look for new offers and switch providers every year to avoid higher prices.
“It is likely that companies will no longer offer unsustainable low-cost deals to some customers,” FCA said.
The FCA will also introduce new rules so that consumers can more easily cancel automatic policy renewals and require insurers to take a closer look at how they deliver fair value to consumers. It will also require home and auto insurance companies to report more data to the regulator.
The new rules on systems and controls, product governance and premium financing will come into effect from the end of September 2021, with rules on pricing, automatic renewal and reporting of data from from 2022.
Six million car and home insurance policyholders paid high prices in 2018 in the Â£ 18 billion market, the watchdog said in 2019. If they had paid the average price for a policy, they would have collectively saved 1.2 billion pounds.
(1 USD = 0.7054 pounds)
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