A damning FCA report has found that Brits overspend by a combined total of £1.2bn on their house and car insurance policies with more than one in ten people paying “very high” prices for their insurance. Those people that are more vulnerable, such as a pensioner that may not be as familiar with searching around on the internet for price comparisons are more likely to be victim of undue price hikes, with one in three affected.
Under the financial watchdog’s rules introduced in April 2017, insurers must “clearly, accurately and prominently” display the new renewal premium next to the premium paid the year previously, as well as actively encourage customers to shop around. But are these rules working?
Price comparison site Go Compare Car Insurance surveyed customers and found that 47% said they don’t trust their insurer to reward their loyalty; in fact, 46% of those surveyed believe the practice of offering better deals to new customers over those renewing cover should be made illegal.
It’s about time the insurance industry is taken to task regarding the way it treats its customers. It’s refreshing to see that the Financial Conduct Authority is looking seriously at the issue.
There’s a common belief that spending many years (along with thousands of pounds) as a customer with same car insurance provider could be rewarded with a reduced premium rate, but sadly, this often isn’t the case. Concerned about the perhaps morally ambiguous practices of insurance firms, the FCA has investigated further and come up with a plan that will hopefully better serve consumers in the future.
Targeted Price Hikes At Those Less Likely To Switch?
Tony Tierney, Legal Manager at Bott and Co advises those seeking new car insurance cover to never accept the first price you come across: “Always shop around and use comparison sites. It’s also always worth calling your insurer and advising them that you are considering leaving unless they can provide a competitive quote. If you do your research beforehand, you can always provide comparable alternative quotes.”
With the recent news that motorists over the age of 30 are being charged higher car insurance premiums, there is even more reason to be extra vigilant when it comes to price hikes. Money Supermarket analysed 1.7m car insurance quotes and found that those aged 30-39 will see a 1% price rise, while both 40 to 49 year olds and 50 to 64 year olds will see a huge 5% upsurge.
Price comparison site Go Compare Car Insurance surveyed customers and found that 47% said they don’t trust their insurer to reward their loyalty.
Those worst affected will be those aged 65 and over, with a ginormous rise of 6%.
Does The FCA Plan To Combat Automatic Car Insurance Price Hikes?
Promisingly, the FCA recognises that current methods used by car insurance providers, such as auto-renewing, can be punishing to customers, and plans to take measures to combat this, including a potential ban of hiking up prices for those that review annually.
Action being considered includes: forcing insurance firms to communicate better with customers, prohibiting firms using automatic renewal in order to harness the level of insurance-switching and banning or restricting punishing prices for consumers that renew year on year.
The FCA has stated that it will publish a complete report and consultation on solutions to the identified problems in early 2020.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA says, “This market is not working well for all consumers. We have set out a package of potential remedies to ensure these markets are truly competitive and address the problems we have uncovered. We expect the industry to work with us as we do so.”
Tony is pleased that the FCA is set to unravel these questionable methods used by insurance providers: “It’s about time the insurance industry is taken to task regarding the way it treats its customers. It’s refreshing to see that the Financial Conduct Authority is looking seriously at the issue.”