Will new insurance rules wipe out switching savings?

New rules to tackle the ‘loyalty penalty’ for home and car insurance customers arrive on 1 January, but will serial switchers lose out in 2022?

  • Changes to insurance market are coming on 1 January 2022 
  • Rules will stop firms giving new customers the best deals at expense of old ones
  • It is hoped this will put an end to the long standing loyalty penalty 
  • We reveal what the new rules mean – and how they could affect you  


From 2022, car and home insurance firms will be forced to stop their long-standing practice of offering new customers far cheaper premiums than existing ones. 

Although many customers shop around for their home and motor insurance every year, those who don’t have effectively been charged a ‘loyalty penalty’ for remaining with the same firm. 

New rules from the Financial Conduct Authority, which come into force on 1 January, mean that the premiums offered to those renewing a policy cannot be greater than the price they would charge to an equivalent new customer, for the equivalent policy.

This is Money asked the insurance industry body, the Association of British Insurers, how the changes will affect the cost of premiums for customers. 

New rules coming into place should help tackle the ‘loyalty penalty’ in the insurance industry

Will switchers lose out under new rules? 

The new rules mean loyal customers should be protected from extortionate price hikes when renewing their insurance policies.

The ABI has asked the FCA to ensure these rules apply whether consumers buy cover from an insurer, insurance broker, price comparison website or a retailer.

Essentially, the changes are about are about re-balancing premiums between new and renewing customers.

The FCA has itself acknowledged these changes will probably lead to some customers paying higher prices, especially if they have previously benefited from big new-business discounts. 

However, the ABI has said it wants the home and car insurance markets to ‘remain competitive’.

And it still wants customers be able to shop around and use comparison sites to find the cheapest and best deal for them.  

Under the new rules, premiums will continue to be calculated independently by insurers, using a wide range of factors.

For example, for motor insurance, a customer’s age, type of vehicle, their driving record and claims history will still be relevant.

Your car insurance renewal premium could still go up, despite the new rules being put in place

Your car insurance renewal premium could still go up, despite the new rules being put in place

What will change the next time you renew? 

The ABI has given the following advice for insurance customers when their home and motor policies are due for renewal:

  • Choose the policy that best meets your needs It is crucial that you buy the policy that most closely meets your needs, not automatically opting for the cheapest cover.
  • Check the renewal terms if you are staying with your existing provider. Read your renewal documents carefully to make sure that the cover meets your current needs and ensure you are aware of any changes to the price, scope of cover, new conditions and any changes in your circumstances that you need to tell your insurer about. Speak to your insurance provider or broker if unsure.

  • Deals may disappear Some of the discounted deals on offer now, may not be available when the new rules begin on 1 January. As the FCA has said, these changes could lead to fewer enticing introductory premiums for new customers.
  • It could still pay to shop around The insurance market will continue to be competitive, with a wide range of policies available from a range of providers. If you are considering switching insurer, make sure you check that the policy best meets your needs.
  • Your renewal premium may still go up Factors such as whether you have made a claim in the last year; whether your risk has changed; or external factors such as increases in the costs of vehicle repairs can all impact on the price of your insurance at renewal.
  • Auto renewal will continue… Some policies renew automatically after a year if you do nothing. Your insurance information should clearly state if an auto renewal option applies. This ensures that you do not find yourself inadvertently uninsured because you forgot to renew, avoiding situations such as driving illegally or finding your home is not covered after a flood.
  • … but will be easier to cancel The new rules will make it easier to cancel the auto-renewal of some policies. If considering this, you should think about any factors that may contribute to you forgetting, or not being able to, renew your policy when the time comes to do so. 

All of these changes will apply regardless of whether you buy insurance from an insurer, insurance broker, comparison website or retailer.

Customers are still encouraged to shop around to see if they could save by buying elsewhere

Customers are still encouraged to shop around to see if they could save by buying elsewhere

Three years ago, the ABI and British Insurance Brokers’ Association started an initiative which aimed to improve insurers’ treatment of their long-standing customers.

As part of this, insurers and brokers reviewed their approach to home and motor customers who had been on their books for five or more years.

A report on the initiative, published in July 2020, found there had been more than 8.5million pricing interventions across motor and home insurance, saving customers a total of £641million. 

Individual firms reported an average saving per intervention ranging between £40 and £150.

James Dalton, ABI’s director of general insurance policy, said: ‘We support these reforms, and are pleased that the FCA has acted to bring them in across the home and motor insurance markets.

‘While the FCA recognises that these changes could lead to price rises for some who shop around regularly, all customers should get fairer outcomes in the UK’s competitive home and motor insurance markets.

‘These are very significant changes and insurers will work with the FCA to ensure as smooth as transition as possible for their customers.’



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