Loyal home and car insurance customers could find themselves paying significantly more than new customers, the City regulator has found.
Ten million policies across home and car insurance are held by people who have been with their provider for at least five years, according to the Financial Conduct Authority (FCA), which is proposing a radical shake-up of firms’ pricing.
It analysed the prices paid by new customers and those who have been with the same provider for more than five years.
As shown in the graphic above, the differences in car insurance prices paid for a typical risk was £85. New customers pay an average of £285 for their car insurance, while customers who have been with their insurance provider for more than five years pay an average of £370.
Similar patterns are found in building insurance, contents insurance, and combined building and contents insurance.
The FCA said that firms use complex techniques to identify customers who are more likely to renew with them. They then increase prices to these customers at renewal each year, resulting in some consumers paying very high prices.
The regulator said many of these consumers are unaware of this, mistakenly believing that their provider is offering them a competitive price at renewal.
In addition, some firms use practices that can discourage consumers from shopping around, including by making it more difficult to cancel automatic renewal.
And just because consumers often switch, it does not mean they will always get the best price.
Even people who switch regularly are not always offered firms’ lowest prices, the FCA said.