New rules forcing insurers to show customers the previous year’s premium on renewal forms is driving more consumers to compare prices and bag a better deal on their insurance.
Research from Consumer Intelligence suggests the change introduced by the Financial Conduct Authority (FCA) in April 2017, has helped car and home insurance customers save, on average, £100 a year on their renewal.
In the first year of the new regime, which aims to highlight the need to shop around, data shows around 1.4 million more drivers and householders have been prompted to compare insurance prices.
According to Consumer Intelligence’s research among 7,600 consumers who have switched in the past two years, shopping around has resulted in an average saving of £64 for motorists and £34 for householders.
The rules require insurers to include the previous year’s premium when inviting customers to renew and promote the need to shop around. Following an investigation by the FCA, the RAC recently apologised for not making the information clearer.
Consumer Intelligence says its data shows around 300,000 more drivers compared prices for car insurance as numbers shopping round rose to 85.1% from 84.1% previously while 1.1 million more home insurance customers are comparing prices at renewal as numbers rose to 77.6% from 74.6%.
However, the number of insurance customers staying with their provider after comparing prices also increased slightly, possibly demonstrating that threatening to switch provider can prompt an improved deal.
But Consumer Intelligence warns the figures also highlight how loyalty can cost customers the longer they stay with a provider. Car insurance customers who’ve been with the same insurer for eight years can save nearly £131 by switching, while householders will save around £119 by moving after seven years.
|AVERAGE SAVING FROM SWITCHING||CAR INSURANCE CUSTOMERS SWITCHING AFTER APRIL 2017||CAR INSURANCE CUSTOMERS SWITCHING BEFORE APRIL 2017||HOME INSURANCE CUSTOMERS SWITCHING AFTER APRIL 2017||HOME INSURANCE CUSTOMERS SWITCHING BEFORE APRIL 2017|
|Nine- plus years||£119.80||£116.71||£124.41||£127.04|
|Source: Consumer Intelligence|
Although it points out pricing pressure across the insurance market has meant that around 85% of motor customers questioned were quoted higher prices and 61% of home customers saw premiums increase.
William Davis, insurance analyst at Consumer Intelligence, says: “Consumers are better informed than ever, and the FCA has made it clear that it is keeping a close eye on whether firms are adequately displaying the previous year’s premium at renewal.
“The regulator hoped that drawing consumers’ attention to what happens to their premiums at renewal would promote competition and ultimately help to wean insurance brands off dual pricing, whereby new customers get the best prices and loyal customers pay more.
However, he warns if the FCA's warnings continue to prompt increased shopping around, then the dual pricing problem might actually become more of an issue, as insurers seek to attract new customers.