New car insurance changes could see firms ‘hike premiums for a large number of customers’

Martin Lewis warns viewers about drastic car insurance changes

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New car insurance rules were launched on January 1, 2022 and means firms cannot dramatically increase prices for existing customers while offering budget deals to others. The rule means prices have to be fair across the board, ending the price walking loyalty penalty faced by many.

However, Ursula Gibbs, Director at Compare the Market, has warned there is still “uncertainty” over what will happen next.

She warned people should avoid “any traps” as insurers may decide to rise prices if they cannot charge existing drivers more money.

She warned the updates do not mean auto-renewing policies will become “the best deal”.

She said: “There is uncertainty over what will happen to the cost of car insurance.

“While the rule changes should end the loyalty penalty, this does not mean that auto-renewing your insurance will get you the best deal.

“People should be careful not to fall into any traps as insurers may decide to hike premiums for a large number of customers if they can’t charge existing customers more.

“Though the size of any price increases for motor insurance may be limited if more Omicron travel curbs come into force.”

The changes come after first being identified in the Financial Conduct Authority (FCA) September 2020 market study.

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They claim in 2018 alone, around six million policyholders would have saved over £1billion if they paid the average price for their risk.

The FCA said insurers will now be required to offer existing customers a price that is no bigger than they would pay as a new customer.

This will end the “unsustainably low-priced deals” offered by smoke firms to attract customers.

The new measures will save consumers £4.2billion over 10 years and will help “the market work better”.

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