Money Saving Expert Martin Lewis has issued an urgent 30-day warning to all drivers in the UK.
The finance guru said that motorists could be hit with new price changes from January and urged everyone to check their insurance documents.
From 2022, car, motorbike, van and home insurers will be banned from charging existing customers more than new ones under a tactic also known as ‘price walking’.
This means it could affect how much you pay each month with new and existing customers both paying the same rates
But there are warnings the change could mean higher prices for new customers.
Martin Lewis explains in the latest MoneySavingExpert newsletter.“The rules aim to end the loyalty premium, where those who renew each year pay more than new customers who switch as they’re offered cheap prices to do so.
“My best guess is firms won’t just cut renewal prices to match those for newbies – rates will meet nearer the middle. This will mean savings from switching will likely relatively reduce.
“It was possible insurers would have already made price changes knowing this was coming. Yet I’ve heard many are waiting until December to see what their competitors do.”
Martin has urged everyone to start shopping around now, adding: “Unless you’ve done all the checks in recent months, try now to see if a cheaper switchers’ deal is available before the new rules hit.”
On average, MSE estimates 23 days before renewal is the optimum time to compare prices. For home insurance, the sweet spot is 21 days before your policy expires.
The reason for this is that if you leave it until later, insurers categorise you as a higher-risk person and charge you higher.
Even if you’re not approaching renewal, it could be worth shopping around, as if the savings are high enough, you could still be better off paying the exit fee and moving elsewhere.
If you do find you can save substantially, start a new policy, cancel the old policy and ask for a refund on the outstanding time period.
Providing you have not claimed, you should get a pro-rata refund minus around £50 in admin fees.
New loyalty penalty ban from January 2022
Most insurers increase their prices for existing customers at renewal in a practice known as price walking.
They use sophisticated processes to target the best deals at customers who they think will not switch in the future and will therefore pay more in the long run.
That’s effectively known as the loyalty penalty – a practice the new rules are hoping to wipe out.
It’s also part of the reason why people are encouraged to shop around and switch every year.
At the same time, these companies are offering below-cost prices to new customers to lure them in.
The FCA’s new rules will ban price walking from January next year.
In a nutshell, it means your renewal price should not be higher than it would have been if you joined the same company as a new customer.
It said these measures will save consumers £4.2billion over 10 years.
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