Consumer expert Martin Lewis returned to our screens Thursday night for the ITV Money Show – with an important message for consumers ahead of the new insurance changes in January.
From next year, home and auto insurance providers will be banned from charging a “loyalty bonus”.
This means they won’t be able to charge more customers who renew each year, just because they know they will stay.
And while that’s good news, Lewis warned it would mean customers are likely to see less competition in the market.
“There is a big rule change coming on January 1,” he said.
“Auto, motorcycle, van and home insurance are all concerned. This is the end of the loyalty bonus and the end of the price march.
“This means that if you automatically renew your policy, your insurer will no longer be able to increase the price year after year. “
Lewis said it’s likely that the prices of existing customers and the prices of new customers will meet in the middle, which means there may be less competition.
“In other words, the savings are going to drop dramatically for people who compare and save every year,” he explained.
The changes take effect in January, but Lewis warned that many insurers would start updating their prices to reflect the change in law next month.
“It means the window of opportunity to get a cheap deal is now.”
Giving viewers advice, he said it’s worth checking out if you can save – even if your renewal policy is six months away.
“If you find that you can save a lot, start a new policy, cancel the old policy, and request a refund for the remaining period.
“Provided you haven’t claimed you should get a pro-rated refund less around £ 50 in administration costs.”
If you’re about to renew, he says the best time to get quotes is 23 days before your auto policy expires, or 21 days for home insurance.
“The reason is that if you wait until later, insurers classify you as higher risk and charge you more.”
Finally, he shared some tips for those who shop.
“Two different comparison websites might have different prices for different insurers, so use two or more. Some insurers like Direct Line are also not listed on comparison sites, so check them individually, ”he said.
“And if you want to stick with your supplier, find the cheapest deal and contact them to match or haggle lower.”
Those looking for a cheaper deal can save more through a refund website such as TopCashback or Quidco. Some pay up to £ 70 when you sign up through them.
“Finally, insurance policies are like loans, so pay up front and you pay the least. “
We have a complete guide on how to shop for cheap car insurance here.
New “market price” rules from January 2022
Many companies increase prices for existing customers upon renewal in a practice known as price walking.
They use sophisticated processes to target the best deals on customers who they believe won’t change in the future and therefore pay more in the long run.
This is part of the reason people are encouraged to shop and change every year.
At the same time, these companies are offering prices below cost to new customers to attract them.
New FCA rules ban the price march from January next year.
The change in law will protect people from the “loyalty bonus”. In a nutshell, this means that your renewal price will not be higher than it would have been if you had joined the same company as a new customer.
He said the measures will save consumers £ 4.2 billion over 10 years.