Insurers in spotlight over new rules designed to protect loyal customers, as experts remain sceptical
Financial experts are sceptical that new rules, designed to stop insurers penalising loyal customers with higher premiums than new policyholders, will lead to a more competitive and fairer market.
The rules, that kicked in on New Year’s Day, mean that home and motor cover insurers will no longer be able to offer below-cost prices to new customers – while hitting loyal customers with higher premiums and year-on-year rises, confident they will not switch to a rival.
Such practices were first exposed by The Mail on Sunday and led to the paper winning a number of prestigious awards for its ground-breaking work.
Flimsy: New rules mean home and motor cover insurers will no longer be able to offer below-cost prices to new customers
Gareth Shaw, head of money at consumer group Which?, says the rule changes will count for nothing unless the regulator closely monitors insurers to ensure they do not find ‘new ways’ to exploit loyal customers.
‘It should be prepared to take action where necessary,’ he says.
The regulator – the Financial Conduct Authority – insists it will be keeping a ‘close eye’ on insurers.
James Daley, a campaigner at Fairer Finance, fears the new rules could inadvertently lead to a less competitive market as fewer people may believe it worthwhile to shop around for cheaper cover.
He says: ‘With a more passive customer base, insurers could look to increase their margins in other ways – for example, by whittling away at the quality of their products.’