This article is correct as of 22 June 2022, please be aware that prices and costs quoted in this article may have changed since publication.
In January 2022, the Financial Conduct Authority (FCA) launched a new set of regulations intended to make paying for insurance fairer for everybody.
But will those regulations actually save you any money? Well, that depends on whether you’re usually loyal to your insurer or not.
What are the new FCA regulations?
Until now, it’s been generally accepted in the insurance industry that most providers will increase your prices at renewal time.
This is known as ‘price walking’ and it’s the opposite of what happens in some other industries – instead of rewarding loyalty with lower prices, it goes the other way.
As a result, the cheapest way to get insurance has typically been to shop around new providers each year, instead of simply staying with the same one, taking advantage of new introductory pricing each time.
The changes to the FCA rules mean that if you’re renewing your insurance policy, you shouldn’t be be charged any more than a new customer with a like-for-like policy. Prior to the rule change, the same two customers might have paid startlingly different amounts. The FCA estimates that these changes will save consumers as a whole up to £4.2 billion over the next decade.
Will I save money?
It depends. If you’ve been loyal to your insurer and perhaps not questioned any price increases, you may well have experienced price walking without realising it. You’re the kind of person these FCA rule changes could benefit.
If you’re the kind of person who shops around every year searching for a new and cheap introductory rate, you might find your average prices actually increase. This is because now they’re being compelled to offer the same price to all customers, insurers can’t lure anybody in the door with these initial low prices – the sort that savvy buyers might have benefitted from in the past.
Will the new FCA regulations be enforced?
You can rest easy knowing FCA regulations are a set of rules and controls that ensure financial businesses work fair and effectively. Insurance providers will have to report data to the FCA, meaning the regulatory body can monitor them and make sure the regulations are being followed.
In fact, FCA regulations already offer you financial protection and savings, with just shy of 60,000 FCA regulated firms in the UK, such as the following:
• General insurers and any intermediaries (for example, brokers)
• Banks, building societies, and credit unions
• Credit providers
• Financial advisors and investment managers.
Are car insurance prices going up or down?
It’s difficult to tell. Research by the Association of British Insurers (ABI) showed that the average price paid by motorists for their motor insurance in the first quarter of 2022 fell by 5% to its lowest level in nearly seven years. The average premium paid for a new policy in the first quarter was £105 higher than for renewals. The average premium for new policies was £480, up £34, on the same quarter in 2021, while the average for renewed policies, at £375, fell by £55.
An increase in the cost of goods, such as paint and spare parts, combined with the ongoing semiconductor shortage means that repairing a car is more expensive than it was, and as a result, insurers have more costs to bear. Unfortunately, these costs can then get passed on to consumers at some stage.
Should I still shop around?
Absolutely. While the new rules stop insurers gouging you at renewal time, it’s still possible that the company you’re with might not be able to offer you the best price overall, so it could be worth shopping around to see how much you could save. It could also be worth looking at any additional products and features that are available on other policies to help find the right policy for you.
Remember that the standard ways of attracting a cheaper price still apply, whether that be choosing a car in a low insurance group or simply parking in a more secure location. Take a look at our car insurance page for more tips on saving money on your car insurance.