Car insurance: Loyalty ‘trap’ could see drivers hit £ 450 in costs ahead of 2022 reforms
New analysis has shown that more than 50 percent of people have been affected by an increase in auto insurance premiums upon renewal in the past 12 months. It happened at an average price of Â£ 81, with drivers being warned ahead of major insurance changes due to go into effect in January.
In contrast, new customers who switch providers pay an average of Â£ 262 less for car insurance and Â£ 113 less for home insurance than those who stay there year after year.
This means that in total, some people who automatically renewed their home and car policies could pay Â£ 456 more for their insurance than those who shopped.
New rules from the Financial Conduct Authority (FCA) will come into effect on January 1, 2022 and will aim to protect customers from the loyalty penalty.
This includes new rules so that renewal quotes for home and auto insurance consumers are not more expensive than they would be for new customers.
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Ursula Gibbs, director of comparethemarket.com, commented on the changes and the impact it would have on drivers.
She said, âWhile upcoming changes in insurance pricing should end the loyalty penalty, people need to be careful not to fall into the trap of assuming they are getting the best deal.
âThe gap between those who renew automatically and those who shop now stands at hundreds of pounds, illustrating how crucial it is for people to continue to shop to make sure they get the best deal available.
âShopping online and switching providers regularly is one of the best ways to make sure you’re not overpaying, saving you hundreds of dollars every year.
âDon’t be complacent about the price of your renewal; check if you can get a better deal elsewhere.
There are also fears that insurance prices will rise as more cars are on the road after the coronavirus lockdown.
Insurance premiums for new customers have come down in recent months as suppliers compete for new business ahead of the regulatory change.
Likewise, more than a quarter of households said their premium with their existing provider had dropped upon renewal, by Â£ 56 on average.
Commenting on the upcoming changes, Sheldon Mills, Executive Director, Consumers and Competition at FCA, said, âThese measures will put an end to the very high prices paid by many loyal customers.
âConsumers can still benefit from researching or negotiating with their current supplier, but won’t be charged more on renewal just for being an existing customer.
âWe are making the insurance market work better for millions of people.
“We will closely monitor market developments going forward and ensure that companies continue to deliver fairer value to consumers.”