New rules to curtail insurance loyalty penalties and auto-renewal woes

Despite new rules announced last year to ban insurance ‘loyalty penalties’ for customers renewing insurance policies, Resolver can reveal that some consumers were still being subjected to renewal price hikes before the rules took effect this week.

Over the past six months, we have also seen consumers becoming trapped in auto-renewed policies because they either didn’t have the means to cancel the auto-renewal, or were not even informed it was taking place.

New rules to ban insurance renewal loyalty penalties

New rules from financial regulator the Financial Conduct Authority (FCA) that ban motor and home insurers from charging consumers a ‘loyalty tax’ for renewing policies have come into force this week.

From 1 January 2022, insurers are no longer allowed to hike premium prices for loyal customers seeking to renew their motor or home insurance policies, effectively meaning that upon renewal their quotes will be the same as equivalent policies for new customers.

In the past, insurers were able to attract new customers with low quote prices, which in many cases were increased year on year for those who did not switch their policy and move to another insurer. The practice, known as ‘price walking’ meant that customers who stayed loyal to their insurer were basically penalised for doing so with higher premiums.

The new rules, first outlined by the FCA at the end of May 2020, also include provisions to make it easier for customers to cancel auto-renewals. Insurers have until 17 January to implement the technical processes needed to comply with the rules – or if they can’t do so they must ensure their customers don’t lose out.

Resolver’s complaints data: insurance price hikes and auto-renewal issues

Resolver’s own survey of more than 1,100 consumers last summer highlighted that more than three-quarters had experienced price hikes on renewal quotes within the previous six months, with the vast majority of these being for no identifiable reason. Four in ten had tried to contact their provider to get a better deal, but more than a third of those that had attempted to haggle were not offered a better deal.

Since the rules were announced last May however, we have continued to see complaints concerning inflated renewal quotes and issues when trying to cancel auto renewals.

Almost one in 10 of the 2,952 complaints made to car and home insurers through Resolver since 28th May until the end of 2021 concerned:

Inflated renewal price quotes;
Problems with cancelling auto-renewal policies; and
Policies automatically being renewed without either the customer being informed or despite requests to cancel.

Among the complaints we saw a customer being charged 40% more for their home insurance renewal than the previous year, an eagle-eyed user that spotted a Black Friday deal that was half the price for new customers compared to their renewal quote, and a long-standing customer of one insurer who found that by shopping around they could get a deal that was one-eighth of the price of their previous policy.

We also saw examples of people with difficulties cancelling their renewal despite being quoted premiums that they knew were cheaper elsewhere – in one case £700 cheaper.

“I have recently received my renewal quote and it has more than doubled in price for no reason.”

Auto-renewal on insurance: can’t cancel, can’t contact

Auto-renewal issues were a common feature in these complaints, with many of those complaining detailing experiences of repeated attempts to contact their insurer through web portals or chat as they were unable to obtain a phone number or email address.

We also received complaints from customers who were surprised to see their auto renewal happen despite not being informed that it was taking place, or thinking they had cancelled the policy already.

One customer had taken out a new policy with the same insurer after cancelling the existing one (to get it cheaper) – only to find that the renewal had taken place so they had two policies on the same car.

“I have tried on several occasions to get through by telephone, spending 55 minutes on hold over three occasions. I then tried to stop the auto-renewal online and the site blocks me.”

What do the new insurance price rules mean for you?

The changes now mean that insurers should not be allowed to penalise you with higher renewal prices for your car or home insurance upon renewal of your policy, meaning that you should pay the same as if you were a new customer.

However, the rules only apply to renewal notices issued from 1 January 2022. Even if your policy is due to start in January, if your renewal notice was issued in December or before, your quote is not covered by the changes. So if you’re in this situation and you still can, it’s worth shopping around to see if you can switch to a better deal.

What do the changes to auto-renewal insurance cancellations mean for you?

Under the rules, the FCA is also setting out provisions to ensure an easier process for consumers wishing to cancel auto-renewed insurance policies.

These include offering ‘easy and accessible’ methods to cancel an auto-renewal. In practice, insurers must offer the same methods to cancel an auto-renewal as you have to buy the policy in the first place – so if you could buy online, you can cancel online. The same goes for phone methods.

The regulator also sets out what it feels to be unnecessary barriers for consumers to cancel including longer call waiting times to cancel a policy than to simply buy it or unnecessary steps a customer has to take to cancel. Cancellations must also be free, so you shouldn’t see a penalty charge.

Switching insurance providers may still get you a better deal

One of the concerns with the new rules is that they may close the loop on cheap new customer deals for ardent switchers who shop around year on year. However, while your insurer is no longer allowed to charge you more than a new customer, you might still have the opportunity to save if you look elsewhere.

So if you’re unhappy with your provider, you want more (or less) features on your policies, or you want to be assured of better customer service should you need it, it may still pay to shop around for a new quote when your policy is up for renewal.

If you’re still getting a price hike on your insurance renewal, or you’re having trouble getting in touch with your insurer, Resolver can help.

Raise your case now.