‘Loyalty penalties’ have been ripping off loyal customers for years, reveals vehicle finance company Carvine. Instead of offering better prices for their existing customers, most have faced higher premiums despite their circumstances and “risk” factors not changing.
But the biggest surprise comes from an example the Financial Conduct Authority (FCA) gave. According to the watchdog, a typical new home insurance customer will pay £130 for their first year of cover. However, after five years of loyalty, that same customer’s annual premium jumps to £238.
In contrast, the average new motor insurance customer will pay £285 for the year. Within five years with the same provider, the same customer will pay £370.
After a string of complaints over the years, championed by a super-complaint from Citizen’s Advice, the FCA has finally stepped in to resolve the ongoing issues.
As of the 1st of January, the FCA has clamped down on loyalty penalties across the motor and home insurance market. While it’ll likely spell the end of cheaper deals for new customers, sustainable and more affordable prices are expected to become the norm.
According to the FCA, the move “will save loyal customers an estimated £4.2bn over” the next decade.
Sheldon Mills, a spokesperson for the FCA, commented, “these measures will put an end to the very high prices paid by many loyal customers […] Consumers can still benefit from shopping around or negotiating with their current provider, but won’t be charged more at renewal just for being an existing customer.
While there will continue to be legitimate reasons for your premiums going up, such as higher crime rates in your area making you or your neighbourhood more of a risk, or you opted to buy over the phone rather than online – you will still be able to shop around for the best deal.
Alex Thomas, a marketing executive for Carvine, said, “with more pressure to upgrade your vehicle to an all-electric or hybrid to curb emissions, saving money on your car insurance is a must. With the ban on loyalty penalties, insurance deals are sure to become a more level field and more accessible for all consumers.”
As we move into 2022, sustainable living is becoming more of a reality for most, and that includes your financial expenditure. With the FCA keeping tabs on what goes on behind the scenes in the insurance market, there is hope for the future of car insurance, after all.
If you found Loyalty penalties – how to save 100s on your car insurance helpful, you’ll find more car buying tips and advice on our Motoring channel.Tags: Car insurance Last modified: January 24, 2022