Loyal customers could be charged higher premiums by their insurance companies in the future simply because they are loyal, warns the Institute of Actuaries.

Insurers now have the technology to accurately determine a member of the public's buying habits – rating them from the good, who renew their policy without question, to the bad who shop around for the best deal.

It could lead to insurers charging loyal customers more for their motor and household cover in the future so that they can offer cheaper premiums to their disloyal customers.

The theory is that it will help eliminate the annual churn of business that adds significantly to insurers' costs.

This week, the Institute of Actuaries released a briefing statement on the practice, called “inertia pricing”, that was described by board member Henry Johnson as “a dog that hasn't barked but might”.

Johnson added that there are both pros and cons to inertia pricing. On the one hand, the practice went against

the traditional insurance tenet of rewarding customer loyalty.

But on the other, the restriction of inertia pricing could be seen as interfering in a free market.

“The publicity could be very bad, because the more loyal you are, the more you get charged,” he said.

“Although this would not be acting in good faith, it would lead to more profitable portfolios and lower premiums all round.”

An Association of British Insurers spokesman said pricing methods were for individual insurance companies to decide, but it was unlikely inertia pricing would take off.

“I don't think they'd get away with it for long,” the ABI said.