Car insurance firms could be banned from increasing costs every year by the end of 2021

Morning Live: Expert shares tips on car insurance

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The FCA said firms would have at least four months to implement any changes with companies given until the end of 2021 to issue updates to prices. Although the FCA has not yet confirmed which changes would be introduced it has previously spoken about the need to end price walking among companies.

This is when firms entice new customers with cheaper policies only to slowly increase premiums year-on-year.

This forces many drivers to switch to a new policy each year and punishes those who stay loyal to one brand.

The FCA said it expects firms to implement any new rules as soon as they are introduced and will “closely monitor” insurers regularly.

Companies could have action taken against them where there is evidence they have not followed the new rules.

The FCA said it would allow firms up to four months to make the changes after a consultation found it would not be possible to update schemes any sooner.

This is because any changes would require “significant operational” changes which will include “developing new pricing models”.

The FCA said: “We have not yet reached a final decision on the details of any rules we might introduce, but we are making this announcement now so firms can plan their change programmes effectively.

“We will publish the policy statement, and any rules we make, at the end of May. The implementation period will start from this point.

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“If any rules are made, we propose to give firms an implementation period of until:

“The end of September 2021 for the systems and controls (SYSC) rules and product governance rules.

“The end of 2021 for the pricing and auto-renewal remedies and the reporting requirements.”

According to the FCA, new customers can pay as much as 30 percent less on insurance than existing customers who have been with a company for five years.

It predicts around 10 million policies across home and motor insurance are held by people who have been with their provider for five years and more meaning they could make huge savings.

It is predicted consumers could save £4.2billion over a 10 year period if a new pricing model is introduced.

Freddy Macnamara, car insurance expert at Cuvva said drivers should see “fairer outcomes” and lower costs in the long run.

He said: “FCA’s remedies are seriously needed to ensure fairer outcomes for customers.

“What the measures mean for consumers in the short-term, is a potential increase in premiums on price comparison websites to level out premiums at renewal time.

“In the long run, people will see fairer outcomes as consumers have a more realistic understanding of the cost of their premiums over time, while promoting loyalty and healthier competition.

“Over the years price comparison websites have controlled pricing in the insurance market, pushing prices so low they’ve become unsustainable, which in turn leads to insurers bumping up prices at renewal to compensate for the initial low premiums set.

“Dual pricing has created an industry that demotes customer loyalty as comparison websites rely on people switching annually.”

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