JANUARY 1, 2022, marked the end of insurance “loyalty penalties.” While new customers boast the best and cheapest deals on the market, loyal customers were being penalised via “price walking”, reveals vehicle finance specialist Carvine.
New rules enforced by the Financial Conduct Authority (FCA) mean that premiums charged to anyone renewing their private motor insurance can no longer be greater than the price offered to new customers for an equivalent policy.
Now, you can expect your insurance policy to be on a level pegging for new and loyal customers alike. Overall, the FCA has estimated that loyal customers will save an incredible £4.2bn over the next decade.
During the fourth episode of this season’s The Martin Lewis Money Show on ITV, Lewis revealed: “there are six million non-switchers who pay up to 150% more, two and a half times more than new customers.”
But what does that mean for the future of your car insurance policy? The FCA’s primary focus is on “channel-specific” insurance, such as price comparison websites, over the phone, through a broker or direct. So regardless of where you buy your car insurance, you should be charged the same as a new customer on the same “channel.”
While it is hard to see the full impact of these changes so early on, the FCA has stated, “We expect that our remedy package will probably lead to some consumers paying higher prices if they currently benefit from significant new business discounts as inducements to switch.” (FCA Market Study, September 2020).
The Regulator further commented, “Regular switchers gain and can potentially sustain low (even below cost) average prices, while customers who do not search or negotiate pay higher prices on average and so cross-subsidise the switchers. Our proposed remedy would eliminate this cross-subsidy and so may lead to higher prices for regular switchers.”
Alex Thomas, a market executive for Carvine, said, “this is the most significant change to the insurance industry in decades. While prices may seem more expensive, you really need to access your needs. After all, if the policy on offer is too cheap, you’ll likely waste money in the long run.”
With the FCA tightening up insurance regulations across the board, one thing is certain: you will save yourself thousands due to the stricter rules now in force.
New research by MoneySuperMarket shows the average price for fully comprehensive car cover rose by over 7% between Q3 and Q4 last year, from £412.44 to £443.67. After a major drop in car insurance prices at the start of 2021, prices have been on an upward trend. Despite this, year on year prices are still down by 6.6% equivalent to £31.14.
| 2020 Q4 | 2021 Q1 | 2021 Q2 | 2021 Q3 | 2021 Q4 | QoQ £ Change | QoQ % Change | YoY £ Change | YoY % Change |
| £474.81 | £401.89 | £401.52 | £412.44 | £443.67 | £31.23 | 7.6% | -£31.14 | -6.6% |
Looking at premiums nationally, drivers in London continue to have the highest premiums at £616.65. They are followed by those in the North West (£509.60) and the West Midlands (£504.76). Drivers in the South West pay the least (£295.75)3.
| 2021 Q3 | 2021 Q4 | QoQ £ Change | QoQ % Change | YoY £ Change | YoY % Change | |
| London | £594.72 | £616.65 | £21.93 | 3.7% | -£62.07 | -9.1% |
| North West | £488.79 | £509.60 | £20.81 | 4.3% | -£48.64 | -8.7% |
| West Midlands | £476.82 | £504.76 | £27.94 | 5.9% | -£57.53 | -10.2% |
| Yorkshire and the Humber | £444.40 | £479.07 | £34.67 | 7.8% | -£26.62 | -5.3% |
|
Northern Ireland |
£459.86 | £472.15 | £12.29 | 2.7% | £5.69 | 1.2% |
| East Midlands | £394.06 | £431.09 | £37.03 | 9.4% | -£23.43 | -5.2% |
| North East | £377.55 | £410.86 | £33.31 | 8.8% | -£22.29 | -5.1% |
| East | £353.02 | £377.62 | £24.60 | 7.0% | -£35.98 | -8.7% |
| South East | £348.73 | £369.55 | £20.82 | 6.0% | -£24.98 | -6.3% |
| Wales | £332.99 | £354.06 | £21.07 | 6.3% | -£30.10 | -7.8% |
| Scotland | £322.56 | £350.10 | £27.54 | 8.5% | -£16.35 | -4.5% |
| South West | £298.05 | £295.75 | -£2.30 | -0.8% | -£24.33 | -7.6% |
The biggest quarterly price increase was seen in the East Midlands for a second quarter running, with a rise of 9.4% – equivalent to an average jump of £37.03. The East Midlands is followed by the North East (8.8% equivalent to £33.31) and Scotland (8.5% equivalent to £27.54). Drivers in the South West were fortunate to see a small drop in prices of 0.8%, equivalent to £2.30.
When it comes to age, younger drivers aged 21-24 have the highest average premium prices at £857.24. Every age group studied saw prices increase, with those aged between 17 and 19 seeing the biggest jump of 17.7%, equivalent to a rise of £60.35. They were followed by drivers aged between 25 and 29 who experienced a hike of 8.3%, equivalent to £49.64, and drivers aged between 40 and 49 who saw rises of 7%, equivalent to a jump of £26.78.
Sara Newell, car insurance expert at MoneySuperMarket, said: “After a major drop in car insurance premiums at the start of 2021, they’ve been on an upward trajectory ever since, with figures for the last quarter showing the most unwelcome jump yet.”
