Car insurance could get more expensive thanks to new rules from January 2022 in the United Kingdom, Compare the Market warned. The purpose of the rules is to make pricing fairer. The Financial Conduct Authority therefore banned a practice that penalised drivers that were loyal to their existing insurers. Providers can no longer now charge motorists more to renew policies than they would pay as new customers. There can be no more loyalty penalties.
The Financial Conduct Authority praised the new rules. Executive Director for Consumers and Competition, Sheldon Mills, said: ‘The measures 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 will not be charged more at renewal just for being existing customers. We are making insurance work better for millions of people’, Mr Mills emphasised.
Higher costs
Compare the Market suggested that insurance companies may try to eliminate any loses that arise from the new rules by increasing other charges. If so, some motorists may pay more. The insurers could raise their premiums for new customers. They may raise premiums for existing customers, too. Insurers could also raise the price of amending policies and make optional extras more expensive.
Car insurance cheap in recent times
The price comparison site added that the average cost of car insurance has been low in recent months. Between September and November 2021 inclusive, it fell to its lowest price for any third quarter since 2014. The average price was £640. It was £721 in 2020, for instance. Compare the Market also argued that insurers may have kept prices low to attract customers before the new rules.
Director, Ursula Gibbs, said: ‘Motorists will be glad premiums are cheaper than last year but there is a sense of buyer beware. It looks like insurers have been keeping premiums lower as part of a clever pricing game to try and lock in as many customers as possible before the new regulations were introduced’, she revealed.
Ms Gibbs added that it is unwise to automatically accept renewal quotes despite the rules that end loyalty penalties. ‘Motorists could lose out if they auto-renew’, she said. ‘By switching to the cheapest premium instead motorists could save about £100. Young drivers could see even bigger savings of close to £300. These savings gained by those drivers switching their provider could also help to offset the current rising cost of living’, Gibbs concluded.