Loyal home and motor insurance customers could find themselves paying significantly more than new customers, the City regulator has found.
Ten million policies across home and motor insurance are held by people who have been with their provider for at least five years, according to the Financial Conduct Authority (FCA), which is proposing a radical shake-up of firms’ pricing.
It analysed the prices paid by new customers and those who have been with the same provider for more than five years.
— Financial Conduct Authority (@TheFCA) September 22, 2020
The differences in prices paid for a typical risk, on average are:
– New customers pay £285 for motor insurance while customers who have been with their provider for more than five years pay £370.
– New customers for buildings insurance pay £130 while customers who have been with their provider for more than five years pay £238.
– New customers for combined buildings and contents insurance pay £165 while customers who have been with their provider for more than five years pay £287.
– New customers for contents only insurance pay £56 while customers who have been with their provider for more than five years pay £138.
The FCA said that firms use complex techniques to identify customers who are more likely to renew with them. They then increase prices to these customers at renewal each year, resulting in some consumers paying very high prices.
The regulator said many of these consumers are unaware of this, mistakenly believing that their provider is offering them a competitive price at renewal.
In addition, some firms use practices that can discourage consumers from shopping around, including by making it more difficult to cancel automatic renewal.
And just because consumers often switch, it does not mean they will always get the best price.
Even people who switch regularly are not always offered firms’ lowest prices, the FCA said.