Each year the British public pays insurers an astonishing £78 billion worth of premiums. More than four people in five have at least one policy - with car and home insurance the most common - according to figures from the Financial Conduct Authority (FCA). There's just one problem - the tactics insurance firms use could well be unfair and that's causing us harm. FCA’s Chief Executive Andrew Bailey said the watchdog has "identified a number of areas of potential consumer harm". As a result, it's launching new study - and considering forcing firms to play fair if they don't agree to on their own. “We want to make sure that general insurance markets deliver competitive and fair prices for all consumers," he said. The FCA is concerned about "loyalty pricing" - where existing customers may be charged higher prices than new customers - as well as firms potentially charging different prices to different consumers based solely on how "price sensitive" customers are.
Georgie Frost, consumer expert at GoCompare, said: “It’s well-known that loyalty doesn't pay when it comes to insurance. Just a glance at the feedback we receive from our customers shows that you can save hundreds of pounds on a policy without compromising cover. “The so-called ‘tease and squeeze’ approach to pricing is the go-to tactic in many industries, including car and home insurance. "New customers are enticed with a competitive price and then, if they don't shop around and switch, they face often stealthy - sometimes blatant - premium increases in subsequent years."
Which? money expert Gareth Shaw said: "This review is long overdue. For years, loyal policyholders have been exploited by insurance providers, punished by excessive premiums, and have had to battle with unclear pricing that makes it difficult for people to understand whether or not they're getting a fair deal. "Customers who prefer to stay with one provider are at risk of being hit with vastly overpriced premiums when little has changed in the service they receive "It's right that the regulator tackles this sector to ensure customers aren't punished for their loyalty and that pricing is clear and transparent across the industry."
Figures from GoCompare show switching and saving can save you £268.69 on car insurance and £77.30 on home insurance. But despite the savings, 65% of drivers simply renewed their existing cover last year. “It’s imperative that people keep shopping around and switching to avoid getting ripped off, but more also needs to be done to make it clearer how customers can switch," Frost said GoCompare offered these tips to not losing out: NEVER accept your renewal quote without first checking that the price you are offered is competitive – even if your insurer was the cheapest last year, Give yourself time to review your cover – note the renewal date in your diary and shop around at least a week before your policy renews to get the best deal, Compare prices AND check the small print. Make sure you’re making like-for-like comparisons and understand all the charges, any penalties, exclusions and terms and conditions you will be required to meet. What's been done already? In May, insurers and brokers launched a new plan to help tackle excessive premium differences between long-standing and new customers.
Hugh Savill, director of regulation at the Association of British Insurers (ABI), said: "While many customers benefit from competitive motor and home insurance markets, we recognise that the market is not working as well as it should for some long-standing customers. "To try and address this, we were the first sector to launch an industry-wide initiative to tackle excessive price differences between new and existing customers earlier this year, and the FCA has welcomed this. "This is an important issue and the industry will work with the FCA to ensure that the market works as well as possible for consumers." The ABI pointed out there have also been the following measures to help consumers recently:
Renewal communications. In April 2017, the FCA introduced a requirement on insurers to show both the current and new premiums on renewal documents. This followed the ABI’s call in 2014 for this to be made a requirement across the market.
Vulnerable Customers Code. In 2016, the ABI and the British Insurance Brokers’ Association (BIBA) published a Code of Good Practice to help vulnerable customers at renewal. This Code aims to ensure that staff are adequately trained to recognise and understand potentially vulnerable customers at renewal and are able to offer flexible options to help address specific needs.