The Financial Conduct Authority (FCA) has finally flexed its muscles in a crackdown on insurance companies that “price walk” loyal customers into ramped-up prices. It’s a big step, and actually might signal the end of great deals for new insurance buyers. Even so, it’s set to save existing customers more than £10 billion over the coming 10 years.

What’s price walking, exactly?

To put it simply, insurance company price walking is a way of punishing “loyal” customers who stick with their insurer year on year. Each time the policy on your home or car renews, for instance, an insurer will often whack a little extra on the cost. It’s generally a small enough increase that you either don’t notice or can’t be bothered about it – but that’s exactly the point. The company will keep on ramping up the prices to see how much they can get away with charging before your loyalty reaches its limit.

Just to put some hard numbers on it, the FCA points out a typical example of a new customer being charged £130 for a standard home cover package. After sticking with the same insurer for 5 years, that annual payment will have ramped up to a massive £238. Meanwhile, new motor insurance customers could face a premium of £285. Again, from the FCA’s example, after 5 years without switching they’ll find themselves paying £370 for no extra benefit at all.

What do the new FCA rules say?

Once the new regulations start to bite in January, anyone renewing their motor or home insurance with the same firm will pay not one penny more than a new customer. On the one hand, this is great news for people who don’t like the hassle of switching their policies all the time. There’s another hand to consider, though. All those yearly “price walks” have encouraged insurers to offer some pretty attractive deals to new customers, just to get their hooks in. Basically, they’re luring you in with lower premiums, then banking on you putting up with the yearly price hikes.

Just to look at it from the insurers’ point of view for a moment, the problem they’re tackling is that people are comparing prices and switching away. The rise in the “smart shopper” mindset means insurers can no longer just assume customers are going to stick with them over the years. That’s why they lower their prices for new customers, then squeeze the ones who stay loyal for all they’re worth. It’s not pretty, but it’s been working for them so far. About 10 million UK home and car insurance policyholders have stuck with the same firm for 5 years or longer, despite constant price hikes.

Why is this happening now?

Honestly, a better question might be “why did this take so long to happen at all?”

The FCA crackdown on insurers is coming in on the back of years of increasingly loud complaints. The extremely heavy straw that finally broke this particular camel’s back was a “super-complaint” from Citizen’s Advice. Their director of policy, Matthew Upton, puts it like this:

“We're pleased to see the FCA setting the bar so high in stamping out this systematic scam, and we now need to see similar action in the other markets.”

What does it all mean in practice?

The main practical upshot of the new FCA rules is that the automatic yearly price walk is now dead. If you renew your current policy after it expires, you’ll pay no more than you would if you’d just signed up.

It’s also going to be easier than before to switch away from your current provider if you find a better offer elsewhere. Automatic renewals are going to be simpler to cancel and companies are being told to keep an eye on their fairness and value for money.

Exactly what this will mean for the prices facing first-time customers remains to be seen. It’s more than possible that the best first-timer offers will vanish now. As always, though, shopping around will still be the best way to land a decent deal.

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