The Financial Conduct Authority has car insurance companies firmly in its sights after announcing a series of shake-ups for the insurance sector.
The radical reforms are aimed at ensuring customers get a fair deal when renewing their policy, regardless of whether they are an old or new customer of the firm.
According to the FCA consumers could be overpaying by £1.2bn a year by remaining loyal to their existing insurance company, whilst new customers receive healthy discounts at their expense. The FCA estimates that there are six million people paying on average £200 too much on premiums. The practice, known as price-walking sees customers charged much more for remaining with the same insurance company year on year.
Christopher Woolard, interim chief executive of the FCA, said: "We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in future, and put an end to the very high prices paid by some long-standing customers. The package would also ensure that firms focus on providing fair value to all their customers. We welcome feedback on the proposals.
“In the long-term, the proposed remedies are designed to improve competition. This should lead to lower costs for supplying insurance, and ultimately lower the prices paid by consumers on average. The FCA estimates that its proposals will save consumers £3.7 billion over 10 years. The FCA will monitor the impact of these proposals on the market.”