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New rules for car and home insurance

The Financial Conduct Authority (FCA) has introduced new rules to make insurance pricing fairer for existing customers.

Amy Smith
Amy Smith
Updated 23 December 2021  | 2 mins read

What are the new rules?

The new rules mean that insurers must offer the same price to both new and existing customers.

Insurers used to offer better deals to attract new customers, which meant existing customers at renewal were often faced with a more expensive quote – this is called the ‘loyalty tax’ or ‘loyalty penalty’.

With the new rules this won’t be allowed, so existing customers’ renewal prices will match what is offered to new customers.

Insurers also need to make cancelling your insurance auto-renewal accessible to everyone. For example, companies can’t require that you can only cancel by phone – they have to make other options available, like cancelling online.

What does this mean for insurance prices?

For existing customers, this likely means that your renewal price will be cheaper as it falls in line with what new customers are offered. But new customer deals might become more expensive to make up for the loss of the loyalty tax at renewal.

Key points

  • Insurers can no longer charge existing customers more at renewal compared to new customers, previously known as the “loyalty penalty”
  • Cancelling your insurance auto-renewal also needs to be made more accessible
  • These rules come into effect from 1 January 2022 and apply to car, home, bike and van insurance
  • It’s still important to compare deals from other insurers to make sure you’re getting a good price

When do these new rules become effective?

The new rules - part of the General Insurance Pricing Practices (GIPP) – come into effect on 1 January 2022.

What kinds of insurance will these new rules affect?

Insurers must offer the same price to both new and renewing customers for:

  • Car insurance
  • Home insurance
  • Bike insurance
  • Van insurance

It’ll also affect products sold alongside the above. For example, if an insurer offers new customers free breakdown cover, then renewing customers must also be offered the same benefit.

If your circumstances have changed

If you change your details at renewal – say you have a change of address or you want to include a policy add-on – or if you’ve made a claim, then your insurer can charge you a different price because your level or risk has changed.

If renewal prices will be cheaper, why compare?

Just because your insurer might be offering you a cheaper renewal price than you’d expected doesn’t mean there aren’t more suitable deals available.

Why settle for a price from only one insurer when you could compare many prices and potentially save more?

It’s still just as important to shop around and recompare to see what other deals are out there.

Does this mean insurers are less likely to offer special deals?

Maybe. But offers like our free £250 free excess cover will still be available, so there could be even more value for money to be had by using comparison sites.

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