Martin Lewis warns viewers about drastic car insurance changes
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From today, January 1, 2022, measures will be put in place to protect drivers from the loyalty penalty in home and car insurance markets. Loyalty penalties, or price walking, is a pricing practice where existing customers are increasingly charged more, the longer they stay with the same insurer.
Following a consultation launched in September 2020, the Financial Conduct Authority (FCA) has confirmed this unfair practice will be banned from today.
The Financial Conduct Authority did however acknowledge that these changes will probably lead to some consumers paying higher prices if they currently benefit from significant new business discounts.
Despite this, the FCA said it believes home and motor insurance markets should remain competitive.
It is estimated that this change could save consumers around £4.2billion over 10 years.
Car insurance companies will have to offer existing customers wanting to renew a price that is no higher than they would pay as a new customer coming through the same sales channel.
The sales channel is how the driver reaches the insurer, usually online, over the phone or via a broker.
The FCA is also bringing in new rules to make it easier to cancel the automatic renewal of their policy, which should make it easier to shop around.
Sheldon Mills, Executive Director, Consumers and Competition at the FCA commented on the new rules.
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He said: “These measures will put an end to the very high prices paid by many loyal customers.
“Consumers can still benefit from shopping around or negotiating with their current provider – but won’t be charged more at renewal just for being an existing customer.
“We are making the insurance market work better for millions of people.
“We will be watching closely to see how the market develops in the future and to ensure firms continue to deliver fairer value to consumers.”
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