Is your car insurance renewal compliant with FCA rules?

There used to come that fearful time each year when that renewal letter from your car insurance company comes through and without fail the quote is more than what you paid the previous year. Every year you have a choice, either; go back onto the comparison sites to find a cheaper deal; or pay more for the price of being lazy by letting the policy auto-renew. But that all changed when the Financial Conduct Authority (FCA) announced some sweeping changes…

What did the FCA change?

The regulator ruled that it was unfair that car and home insurance customers get penalised by what is referred to as a ‘loyalty charge’ – whereby you always get the cheapest insurance rate in year one only to then be charged more in year two and beyond. Effectively paying the price for being a loyal customer! A huge review of insurance data conducted by the FCA found that 6 million customers would have saved £1.2bn if they paid the average price based on the risk they posed. The FCA therefore implemented new rules which prevent consumers from having to ‘price walk’. This means that if there is no activity relating to your car or home insurance policy each year (e.g. you pay for the insurance and there is no accident/claims activity) then your insurer must charge the same or less than what they would charge to a new customer under an equivalent policy.

Checking your future renewals

These changes came into effect from 1 January 2022 and therefore you may have already renewed your car insurance and been pleasantly surprised to see a much more competitive quote. If not then we suggest you:

  1. Look out for your renewal quote, which should either be posted or e-mailed to you, and check the price against what you paid previously.
  2. Contact your broker or insurer if the policy is more expensive and ask them why this is the case.
  3. Continue to shop around by checking direct insurance and comparison websites. Just because the renewal quote is the same or lower it doesn’t mean this is the best deal on the market.

For more information see the Association of British Insurers website here. The press release from the FCA and its policy statement on general insurance pricing practices is here.

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