The Financial Conduct Authority (FCA) has published a market study into the pricing of home and motor insurance, and it has concluded that around 6 million policyholders pay high prices and are not getting a good deal on their insurance.
The FCA found that:
- Insurers often sell policies at a discount to new customers and increase premiums when customers renew
- Longstanding customers pay more on average, but even some people who switch pay higher prices
- 1 in 3 consumers who paid high premiums showed at least one characteristic of vulnerability, such as having lower financial capability. For consumers who bought combined contents and building insurance, lower income consumers (below £30,000) pay higher margins than those with higher incomes.
- People who pay high premiums are less likely to understand insurance or the impact that renewing has on their premium
- Most firms, when setting a price, include their expectations of whether a customer will switch or pay an increased price. This is not made clear to the customer.
- Firms engage in a range of practices to raise barriers to switching.
- Many consumers who switch or negotiate their premium can get a good deal.