Martin Lewis warns viewers about drastic car insurance changes
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New analysis has shown that more than 50 percent of people have been hit with increased car insurance premiums at the point of renewal in the past 12 months. This has come at an average price of £81, with drivers being warned ahead of major insurance changes which are set to come into effect in January.
By contrast, new customers who switched provider pay, on average £262 less for motor insurance and £113 less for home insurance than those who stay put year after year.
This means that, in total, some people who auto-renewed both home and motor policies could be paying £456 more for their insurance than those who shopped around.
New rules from the Financial Conduct Authority (FCA) will come into effect on January 1, 2022 and will look to protect customers from the loyalty penalty.
This includes new rules so that renewal quotes for home and motor insurance consumers are not more expensive than they would be for new customers.
It will prevent insurers from offering new customers better deals than loyal customers.
In 2018, six million loyal policy holders would have saved £1.2billion had they paid the average price for their actual risk.
The FCA are also aiming to end “price walking” which is when firms increase prices for existing customers each year at renewal, meaning consumers have to shop around and switch every year to avoid paying higher prices for being loyal.
Despite this, some industry experts are warning that while the FCA changes should end loyalty tax, it could lead to insurers increasing prices across the board in January.
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Ursula Gibbs, director at comparethemarket.com, commented on the changes and the impact it would have on drivers.
She said: “Although the upcoming changes to insurance pricing should end the loyalty penalty, people should be careful not to fall into any traps of assuming they are getting the best offer.
“The gap between those who auto-renew and those who shop around currently stands at hundreds of pounds, illustrating just how crucial it is that people continue to compare prices to ensure they get the best deal available.
“Shopping around online and switching providers regularly is one of the best ways to ensure you are not paying over the odds, potentially saving hundreds of pounds each year.
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