A WATCHDOG has demanded an end to the “loyalty tax” on customers being fleeced for staying with their insurers.
New customers typically pay £285 for motor insurance while customers who have been with their provider for more than five years pay a whopping £370, according to analysis.
This practice, known as “price walking”, would be banned under proposals from the Financial Conduct Authority — with increases allowed only in line with changes in customer risk.
The FCA estimates that its plans to end gradual yearly price increases will save people £3.7billion over ten years.
Ten million home-and-motor policies are held by people who have been with their provider for five years or more.
Christopher Woolard, the interim FCA boss, said: “We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in future, and put an end to the very high prices paid by some long-standing customers.
“The package would also ensure that firms focus on providing fair value to all their customers.
“We welcome feedback on the proposals.”
Dame Gillian Guy, chief executive of Citizens Advice, said: “It’s nearly two years since we submitted a super-complaint on the loyalty penalty and we’re pleased to see the FCA is proposing strong action to crack down on this systematic scam.
“We’re especially happy to see it tackling price walking – gradual year-on-year price increases – and making companies automatically switch their customers to better deals.
“It’s important to remember these are proposals and have an introduction date of 2022 which is a long way away. It is essential that the FCA confirm and implement these quickly to bring insurance customers’ prices down by £370 million a year.”
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