The practice of insurance companies stealthily hiking policy prices when customers renew looks set to become a thing of the past, following the introduction of new rules from next April that will force firms to spell out exactly how much a renewed premium costs compared with the previous year.
The Financial Conduct Authority (FCA) has today (10 August) published a policy statement that orders insurance companies to be more transparent in their correspondence to customers about how much they're paying to renew policies for products such as car and home insurance.
The message from MoneySavingExpert.com has always been that you should NEVER automatically renew with the same insurance company, as the best deals are often for new customers. These new transparency rules, which will come into force from 1 April 2017, will make it even more obvious when firms are trying to rip off existing customers.
As well as making the difference in policy price clear to customers, the FCA's incoming measures will also mean that companies have to actively encourage long-standing customers to 'shop around' for the best price and policy when they contact them about renewing.
Consumers who've renewed with a particular insurance company on four consecutive occasions will be given an additional 'prescribed message' encouraging them to identify the best deal available to them.
Today's policy statement follows a consultation, which closed in March this year. One slight amendment to the original proposals is the requirement that where a consumer's circumstances have changed during the course of holding their policy (eg, you've changed your car), firms must give an 'annualised premium' reflecting any mid-term adjustments, instead of last year's premium, when customers renew.
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'A hammer blow to insurers'
MoneySavingExpert.com managing editor Guy Anker says: "The move strikes a hammer blow to insurers who for many years have ripped off their loyal customers with hugely inflated renewal costs. Now, by having to display the full effect of their hikes, they hopefully won't get away with it for much longer.
"Our clarion call to people has always been to look for a better deal using our insurance cost-cutting systems and NEVER automatically renew. This should encourage even more to do so, possibly saving them hundreds of pounds a time."
The announcement of these transparency rules comes just a month after we named and shamed nine insurance companies that charge loyal customers a renewal 'admin fee'.
'We've been guilty of auto-renewing... but after reading MSE we're converted!'
Don't simply take our word for it – here are just a few of the many satisfied MoneySavers to have contacted us in the past few days to say they've saved after refusing to auto-renew.
Lamorna emailed: "Recently my partner lost his job and had to take a much lower-paying one. This week we decided to sit down and go through our direct debits and other costs. We have been guilty in the past of just auto-renewing.
"When we looked, we were paying £70/month for home contents insurance – that's £840/year. We don't own much of value and the policy was for £50k. My partner took out the policy in 2009 and with a busy job never bothered to search around, instead just letting it auto-renew.
"After reading up on your site I found a contents insurance that included emergency call out, legal costs and cover for £100k for £79. I then bought it through Topcashback, which I didn't know about until I read your site, meaning I should receive £52 back. So in effect I will have paid £27 for my policy that pays out more than the one we had been paying £840 for."
Mary emailed: "I've saved £259 using comparison sites when my buildings and contents insurance was due for renewal. Shocking that I was being charged so much, and the new deal gives me better cover. Thanks MSE."
Michael emailed: "Got a renewal for £1,600 from Diamond – went on the comparison sites and it dropped to £1,200, then I called up Diamond and blagged it for £950. Thank you MSE."
What does the insurance industry say?
James Bridge, assistant director for conduct regulation at the Association of British Insurers, says: "Showing this information should help customers better understand what they are being offered and decide whether to shop around or stay with their existing provider.
"Since only a third of insurance policies are bought directly through an insurer, it's important that the FCA is implementing this across the market to include brokers and intermediaries."