The regulator previously stated that its rules against price walking should see consumers save £4.2bn, however

Significant numbers of insureds are paying more to renew their home and car insurance policies, despite the FCA’s ban of price walking in January 2022, according to a study from market research organisation Which?, published today (31 August 2022).

In a survey of more than 14,000 Which? members, the firm found that 51% of respondents that took out home insurance were paying a higher premium in the first six months of 2022 compared to premiums they paid between May and December 2021 - before the FCA’s new rules came into force.

Around four in 10 (43%) of surveyed members with car insurance have also seen price increases this year.

The average premium increase for these respondents was £35 for car insurance customers and £41 for home insurance customers.

Of the customers paying more for their cover in 2022, 50% were renewing with their current car or home insurer, while 31% had switched to a different provider.

In January 2022, the FCA implemented new rules to ban car and home insurers from offering more competitive premiums to new business customers compared to renewing policyholders - this practice is known as price walking.

Therefore, underwriters can no longer differentiate between new customers and renewing ones when it comes to pricing.

New insurance customers previously benefited from price walking by being offered discounted premiums that were subsidised by the higher prices being paid by long-standing policyholders.

In May 2021, ahead of the regulator’s pricing rules coming into effect, the FCA claimed that its new measures should see consumers save £4.2bn over 10 years.

Contrasting Which?’s findings, a spokesperson from LV= told Insurance Times that “the majority of our car and home insurance customers are seeing their prices go down, which demonstrates that the new rules are working and customers are benefiting” from the regulator’s price walking rules. 

They continued: “Customers renewing from 1 January onwards aren’t paying more than a new car or home customer for a like-for-like policy bought in exactly the same way as their original policy, on the same day their renewal quote was generated.

”Using an external consultancy firm, we regularly track the number of customers renewing their policies compared to the industry average and we’ve been pleased to see that we’re above average and most of our customers are choosing to stay with us. This is also reflected in our own data too.

“The new [FCA] changes don’t mean renewals will always go down though and there will be situations where prices increase. For example, we are seeing inflationary pressures and the costs of claims are significantly increasing.

”Factors such as higher used car prices and the increasing cost of parts is driving [costs up] in motor claims, along with material and labour increases in home insurance. Severe weather at the beginning of the year has also had an impact, as well as increasing subsidence claims from the dry weather seen this summer.

”With these events more likely to occur in the future, we have to take this into consideration when calculating premiums.”

Perks of haggling

In addition to the rise in renewal prices this year, Which?’s survey found that 25% of respondents discussed their quoted premium price with their insurer. For those who haggled, 48% gained a reduction in their premiums – averaging £56 for car insurance customers and £54 for home insurance policyholders.

Those who switched car insurer instead of haggling were paying an average £43 less compared to those renewing. Home insurance switchers, on the other hand, were paying £103 less once they moved provider.

Which? also found that customers who found a cheaper quote online while shopping around were able to use this information to negotiate a lower price with their current insurer.

The market research firm believes these discrepancies may be occurring because the new price walking rules still allow insurers to offer customers different prices depending on the channel used – for example, whether they go directly to the insurer or use a price comparison website.

LV=’s spokesperson agreed. They said: “It’s important to highlight that if a customer decides to go and look for a new quote on a different day, on a different channel and using different details to those we have on their existing policy, then the price could be different and this is in line with the rules.”