Drivers urged to switch car insurance ahead of rule changes in January

Published 03 December 2021

The Financial Conduct Authority (FCA) is introducing new pricing regulations on 1 January 2022, which could mean drivers who regularly shop around face higher prices.

The new rules mean that insurers have to offer renewing customers a price that is no higher than they would pay as a new customer.

They follow an FCA market study which found that millions of home and car insurance customers lose out if they renew repeatedly with their current provider.

The new rules will benefit loyal customers but the FCA acknowledged that insurers are likely to no longer offer “unsustainably low-priced deals to some customers”.

Car And Coins

Price comparison website Comparethemarket.com is warning drivers that although its research shows December is consistently the most expensive month to switch, with an average premium of £703 (£50 higher than the average premium for the rest of the year and £64 more than March - typically the cheapest month for car insurance) now might be a better time to switch than January or later, given the changes.

Ursula Gibbs, director of Comparethemarket.com, said: "While motor insurance has typically been cheap at the start of the year, 2022 could be different.

"With a major regulatory rule change fast approaching, the cost of insurance could increase significantly next year.

"If your policy is due to auto-renew in the next few weeks, you may be better off switching sooner rather than later."

Keys And Money (1)

As part of the new FCA rules, consumers will be given easier methods of cancelling the automatic renewal of their policy.

Insurers will also have to report data to the FCA so it can supervise the market more effectively.

Sheldon Mills, executive director, consumers and competition at the FCA, said: "We are making the insurance market work better for millions of people.

"We will be watching closely to see how the market develops in the future and to ensure firms continue to deliver fairer value to consumers."

David Robinson, pricing director at AXA UK, said that the changes "offer a great opportunity for insurers to form stronger and longer-lasting relationships with customers", while a spokesperson for LV= General Insurance said that customers receiving their renewal quote after 1 January may even pay less than a new LV= customer, provided it's a like-for-like policy.

A spokesperson for Aviva added: "We welcome the FCA's intent to bring greater clarity and consistency to consumers across general insurance pricing and we continue to work with the FCA and the industry to implement these new rules.

"It's important the changes are fair to everyone and that the industry remains vigilant to any unintended consequences for some groups of customers.”

When should I switch my car insurance?

By switching 20 days before the end of a policy compared to the day of renewal drivers could save, on average, £306 on their car insurance, with an average cost of £401 compared to £707, according to Comparethemarket.com

The cost rises as you get closer to the end of the policy, with an average of £431 two weeks before, £506 one week before, and £617 the day before a policy expires.

What factors determine the price of car insurance?

Pricing for insurance is based on a wide range of risk factors, including annual mileage, make and model of the vehicle and previous claims history.

Once these factors have been considered, insurers sometimes apply additional discounts to attract new customers.

This ‘dynamic pricing’ model has meant that the cost of insurance can change throughout the year, depending on the level of demand at that particular time.

Comparethemarket.com research on monthly changes in the cost of motor insurance over the last eight years found that prices are usually cheap in the first three months of the year, steadily rising through the year to then spike in December.

Where can I get the cheapest car insurance?

We've put together a guide to cheap car insurance, which gives you the low-down on how much you should be paying, what will make a difference to your premiums, and the top 10 ways to save hundreds off your next car insurance renewal.

>>>Read our guide to cheap car insurance

Comments

hissingsid on 4 December 2021

The new rules should be welcomed, and should be extended to other services such as breakdown assistance providers who offer attractive introductory rates and then massively increase them at renewal.

Once new and existing policy holders are treated equally there should be less need to shop around, although it will still be wise to check that premiums are competitive before renewing. People who allow their policies to renew automatically are simply lazy.

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Engineer Andy on 5 December 2021

Sadly I suspect that all the insurers will do is just put the price up for new customers, with existing ones not seeing any benefit by reduced premium renewal quotations.

This new rule is obviously designed for the benefit of some OAPs who are not tech-savvy (and thus find it difficult to shop around using screen-scraper websites, assuming they can use a comupter at all), but really it is presumably to benefit just those people more generally who are just lazy.

The daft thing is that - especially for the young and middle aged, insurers SHOULD offer better deals to stay because they then don't need to spend a fortune on marketing, concentrating on providing a high quality service (including customer service) and relying on word of mouth (as good firms always used to) to keep business and gain new customers without spending anywhere near as much (including putting right mistakes due to poor customer service).

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Oldboy on 10 December 2021

“Roll em over lay ‘em down and do it again” is the chorus of an old 1950s ditty

Still applies to lots of insurance, not just car and breakdown insurance

D&G operate our Worster Bosch boiler cover, and tried to increase the premium from £21 to £28 per month recently. When challenged they dropped it back to the £18 we were charged when we first took out the cover 5 years ago ! I think this was a D&G scam, rather than WB.

Actual W-B cover is very good btw, they have replaced almost everything on this 16 year old boiler over the years within the subscription fee, so no complaints there .

Some insurers make a point of reminding customers what their last year’s premium was with the renewal notice; a very good practice in my view which all should adopt.

I don’t auto-renew any of my insurance policies, everybody needs to beg for my business !

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