Car insurance firms use loopholes to keep costs high for loyal customers

theguardian.com:

Car insurance premiums for renewing customers are up to double the price quoted to new ones despite a recent ban on loyalty penalties, according to motorists who have contacted Guardian Money.

One customer was informed that his renewal premium would be £368.74 but similar cover with the same firm was quoted at £215.22 on a price comparison website. When he complained his renewal price was revised down to £245.

Since 1 January, insurers have been banned from overcharging loyal policyholders in order to fund discounts to attract new customers. According to the Financial Conduct Authority (FCA), which implemented the ban, 6 million customers who stayed with their provider overpaid £1.2bn in 2018. It estimates that the new rules will save consumers £4.2bn over 10 years.

However, consumers who assume that the ban allows them to put their feet up without paying a price may be in for a shock. Loopholes in the new rules mean they may still end up spending more to renew an existing policy than to buy a new one from the same provider. Companies are still allowed to discriminate between new and existing customers depending on when and how they apply for a quote.

Martin Lewis, the founder of MoneySavingExpert, says that while some loyal consumers will save money thanks to the new rules, they may struggle to work out if they are being charged fairly. “The [loopholes] mean there is wriggle room in the system, so it’s tough to pin down if insurers are playing games,” he says.

A spokesperson for the FCA says consumers should still shop around. They added: “We are using a range of tools to assess firms’ compliance, including thorough analysis of reporting data from firms, as well as consumer and market intelligence.”

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