With so many options out there, it can be easy to become overwhelmed and remain with your current insurance provider. It can also be quite a hassle to trawl the internet for that perfect deal. However, recent research by the FCA has found that taking the time to weigh up all your options when choosing a provider could yield serious dividends.
The FCA estimates that around 6 million policyholders are paying high prices and aren’t getting a good deal on their motor and home insurance. They estimate that if those policyholders paid the average premium, as opposed to their current higher one, they could be in for total savings of £1.2 billion per year.
They also discovered that insurers often sell new customers a discount policy and then increase the premium when it comes to renewal. And the longer you stay with your insurer, the more you will pay on average. Many providers even factor in the likeliness of a customer switching when they set prices, which is not made clear to the customer. Providers then target those less likely to switch with higher prices.
Christopher Woolard, executive director of strategy and competition at the FCA, has said that the “market is not working well for all consumers.” The FCA has set out a package of potential remedies to ensure these markets are truly competitive, including:
- Stopping practices that discourage switching by imposing restrictions on the ways firms use automatic renewal.
- Making sure firms are clear and transparent in their practices, including how they communicate with customers.
- Banning practices that raise prices for consumers who renew each year, or introducing a requirement that makes firms automatically move customers onto cheaper equivalent deals.
- Creating an environment that encourages innovation, so that the insurance market can benefit from technological developments, such as Open Finance.
A final report is set to be published in Q1 2020 following a consultation period on the proposals. In the meantime, it may be worth taking a look at your current insurance policies and carrying out a little bit of market research. It could be that you’re one of the 6 million policyholders who are paying too much for insurance. There are quite a few price comparison sites out there that can serve as a great tool when it comes to choosing an insurance provider.
We recommend that you review any auto-renewals and make a note of your expiry dates, so you can prepare appropriately.