Measures to protect loyal home and motor insurance customers

The FCA has published a policy statement setting out measures to improve competition and protect home and motor insurance customers from loyalty penalties.

Many firms increase prices for existing customers each year at renewal in a practice known as "price walking". The cost of price walking for customers is high, in 2018, 6 million loyal policy holders would have saved £1.2 billion had they paid the average price for their actual risk.

One of the key measures the FCA is seeking to introduce is a ban on price walking, which will require firms to offer renewing customers a price which is no higher than they would pay as a new customer. The policy statement sets out a variety of issues which must be considered when calculating a customer's "equivalent new business price", including offers of points in a loyalty scheme, vouchers, cash back and free add-ons.

In addition to the ban on price walking, the FCA is also implementing measures requiring insurance firms to do more to consider how they offer fair value to their customers by building on the rules in their Product Intervention and Product Governance Sourcebook.

The measures come into effect in the final quarter of 2021 and the beginning of 2022.

These measures continue to demonstrate the FCA's focus on increasing consumer protection and ensuring consumers are given fair value for the financial services they pay for.