Will new FCA regulations really mean the end of the ‘loyalty penalty’ for retail insurance customers who renew?
With new FCA rules coming in from October, will existing retail insurance customers finally be offered the most competitive premium options?
For a long time now, many customers with an existing insurance policy have discovered that loyalty doesn’t always pay off.
People usually stay with the same insurance provider because it is more convenient. But up until now, they haven’t enjoyed the same great deals as the ones that insurers use to tempt new customers. Hopefully, that’s all set to change.
Ending the loyalty penalty
While new customers can take their pick of policies that offer great value for money, the options are less attractive for those who don’t decide to shop around. Known as the ‘loyalty penalty’, customers who simply renew their existing policies are generally charged higher premiums than new customers.
The Financial Conduct Authority (FCA) has now decided to act on the issue, with new rules coming in from October. The changes have come about as the result of a ‘super complaint’ by Citizen’s Advice.
The new measures fit into a broader strategy by the FCA, who are looking at generally tightening governance and regulations in the industry around renewals and reporting. They suggest that getting the ‘loyalty penalty’ rules in place could save around 10 million home and car insurance customers nearly £120 a year.
The rules aim to prevent ‘price walking’ by insurance providers. This is the practice of simply increasing insurance premiums year on year for existing customers. Crucially, this doesn’t happen because it is any more risky to insure these customers. Instead, they use the most attractive, best value for money deals to attract new customers.
Time for an increased focus on value
The FCA hopes that their new regulations will increase the focus that insurers put on providing value for all of their customers, both new and existing. Our take is that this is certainly an encouraging step in the right direction.
We are pleased to see that the Government is now taking action to prevent insurers from offering deals that prioritise one customer group over another. And while we’d always encourage customers to shop around for the best deals, we’re also happy to see that loyal customers will no longer be penalised.
Our hope now is that the new regulations will succeed in encouraging insurers to think even more about the value they provide to every customer they serve.
To find out how we can help you with your insurance and risk management needs, please call us on 01274 515 747 or email us at email@example.com