New FCA pricing regulation
What you need to know about the new regulations and some frequently asked questions
A quick overview to the new FCA pricing changes
If you’re an existing home or motor insurance customer, you won’t pay more than a new customer for an equivalent policy. Prices can still vary depending upon how you set up your policy (e.g. directly from an insurance provider’s website versus through a price comparison site).
The Financial Conduct Authority (FCA) is implementing these pricing regulations, which focus on home and motor insurance. We welcome these reforms to make the pricing of policies fairer and have been working closely with the FCA and the Association of British Insurers (ABI) to help shape the rules.
There are additional changes around giving clearer information about payment options and making sure that customers find it easy to stop their policy from automatically renewing if they want to.
The new rules affect the whole market and every insurance provider must adhere to them. Plus, we’ll all be reporting back to the FCA on our new pricing structures to help them check that the rules are being followed.
The FCA’s main finding from their research was that, while many people shop around for the best insurance quote, others don’t. As a result, existing customers weren’t always being rewarded for their loyalty.
The new regulations address this issue. Now, anyone renewing their policy won’t be charged more than a new customer would pay for an equivalent level of cover.
Importantly, this rule only applies when comparing existing and new customers purchasing equivalent levels of cover through the same sales channel.
For example, if an existing customer bought their insurance policy online and wants to renew, they’ll now be charged the same as a new customer who is also buying a similar level of cover online. By contrast, the renewal price for a customer who bought their policy online wouldn’t be compared with a quote for a new customer looking to purchase a similar level of cover over the phone.
Yes, the FCA has also looked at the automatic renewal of insurance policies which for us includes home and motor insurance.
They want insurers to make it easy for customers to stop their policies from renewing automatically if that’s what they choose to do.
This is to encourage consumers to consciously make the decision to stay with their existing provider when their policy ends or switch to a different provider.
Additionally, the FCA has strengthened the rules on the information we tell monthly paying customers who are charged extra for breaking their payments down into manageable chunks.
Every insurer is required to follow these regulations as of 1 January 2022.
The new rules make sure that existing customers pay the same as a new customer buying a policy through the same sales channel.
There are lots of ways (channels) in which to buy insurance:
- Directly from an insurance provider’s website
- By calling an insurance provider
- Through a price comparison site
- By using a cashback site
- Via an insurance broker
- Using any other third party.
Remember that the new rules affect all home and car insurance providers. Therefore, every insurer will need to stick to the new pricing practices.
The FCA is focused on home and motor insurance because these products were shown to have the greatest price differences between a renewed policy and a brand new one.
Other types of insurance aren’t affected in the same way because they have other factors to consider and different approaches to pricing. For example, new pet insurance quotes don’t cover pre-existing conditions, but a renewal quote may.
The new regulations have one main goal: to make sure that existing customers pay a fair price for their insurance and don’t lose out for being loyal.
Each insurer will still be able to calculate the risks of insuring your home or car based upon their set criteria. So in reality, some people will see lower quotes, others may not, and some might not see much change at all.
Many people don’t want the hassle of shopping around for insurance quotes and the FCA’s new rules look to protect those that don’t.
For example, if you bought your policy over the phone directly from an insurance provider, you might find a better quote if you used a price comparison site for your renewal.
Insurance companies are still allowed to set their own prices, so you might have to use a different sales channel to find the best deal.
Customers who get a renewal quote might be better off using a price comparison site or an insurance broker. That’s one of the reasons why we always tell customers at the renewal stage that they may be able to get the cover they want at a better price if they shop around.
Not necessarily, a renewal quote is generated a few weeks before the renewal date so that it reaches customers at the right time. For example, if your insurance policy expires on 1 March, we might calculate your renewal price at the end of January to make sure that you get your renewal quote in time.
Also, if you get another quote from a price comparison site, the price might be different because we’d have been using different information when we made our calculation.
It’s also worth remembering that price comparison sites might be using different data to calculate a quote from all the insurers they work with. This could also affect your premium.
Your renewal price will be generated about 4 weeks before your new policy is due to start and prices may have changed in the meantime.
The FCA’s new rules only apply when comparing new and existing customers who are purchasing an insurance policy through the same sales channel on the same day.
If you got a renewal quote in 2021, it won’t be subject to the new rules and it’s possible that your renewal quote will be different (either higher or lower) than the equivalent quote for a new customer. As always, we encourage people to shop around when buying insurance.
It depends upon how you prefer to buy your insurance. It may cost more to buy your insurance over the phone directly from an insurance provider versus the insurance providers website. This is because it’s more costly to support a call centre than a website. That saving is often passed on to the consumer and is one of the reasons we encourage people to shop around when buying insurance.
It’s important to remember that insurers constantly change their pricing strategies for many reasons, so quotes in the past have been correct at the time they were given.
We’re passionate about delivering the best for our customers and, along with the rest of the insurance industry, we’ve been working with the FCA and ABI to develop and implement these new rules.
Not necessarily. The new rules mean that if you’re renewing your policy, we’ll make sure the renewal quote isn’t higher than the equivalent price for a new customer with a like for like policy.
So even if you haven’t made a claim on your policy there are other reasons why your renewal price may be higher such as:
- The impact of inflation
- General market conditions such as the increasing cost of repairs, or the cost of replacing lost or damaged items
- Changes to government taxes, such as an increase in Insurance Premium Tax (which is set by the Government).
Insurers change their pricing strategies all the time for a variety of reasons, so the quote you received in the past was correct for your home or car at the time it was given.
The new rules are there to make sure that all customers are treated fairly and that new customers don’t receive better value for money than existing customers.
No. Your cover will only change if you’ve asked us to change it, or if we’ve told you about any specific changes to your policy.
Many factors are taken into consideration when calculating an insurance premium. People with similar homes or cars will not necessarily get similar quotes.
The new rules mean new and existing customers must be treated the same, so consumers can be confident in the quotation process.
Not right now with MORE THAN. Our current position is that we’ve decided to remove all incentives for new motor and home insurance customers so that we’re compliant with the latest regulations.
The FCA has introduced these new rules to ensure new and existing customers are treated the same.
Insurance providers can offer cash or cash-equivalent incentives to new customers but, if they do, those incentives also need to be taken into consideration for renewing customers.
Insurers change their pricing strategies all the time for a variety of reasons, so the quotes in the past have been correct at the time they were given.
It’s also worth pointing out that these are new rules and there’s no expectation from the FCA to look back at pricing practices in the past.