New rules designed to make insurance renewal notices more transparent and prompt us to shop around may not go far enough, and as such may not have the desired effect of a significant increase in the number of people who ‘switch and ditch’ expensive policies, warns comparison website GoCompare.
The new renewal rules
From April 1, 2017, insurers will have to tell policyholders how much they are currently paying for their cover when they send out renewal reminders. However, the new Financial Conduct Authority (FCA) rules do not prescribe exactly how the information should be laid out. They simply state that it should be clear and accurate and in a prominent place, so that the customer can easily compare the renewal price with the previous year’s premium.
Insurers to tell longstanding customers to shop around
In an attempt to stop longstanding customers paying more for the same cover than new customers do, insurers will be required to identify customers who have renewed with them for four consecutive years. Renewal notices issued to these customers will have to contain an additional prescribed message encouraging them to shop around: “You have been with us a number of years. You may be able to get the insurance cover you want at a better price if you shop around”.
Which cover is affected?
The new rules will apply to general insurance products including car and home insurance and the FCA estimates that the new renewal process will benefit consumers by £64 million to £103 million per year.
Lee Griffin at Gocompare.com, said: “We welcome the fact that the FCA is trying to improve renewal information for consumers, and don’t want this call to action to be a missed opportunity. We will be keeping a close eye on how the rules are adopted by insurers, and the impact the new rules have on consumer behaviour.
"There are already a lot of words on a renewal letter - which few people take the time to read – and there’s the potential that all this will do is add a few more."
5 tips to get the best insurance deals
- Give yourself time to review your financial arrangements, keep a diary note of key dates including car and home insurance renewals
- Never accept insurance renewal quotes without first checking that the new price you are being offered is competitive
- Compare prices and check the small print. Make sure you’re making like-for-like comparisons and understand all the charges, any penalties, exclusions and terms and conditions you will be required to meet, and that the product is right for you
- Use a comparison website – they provide quick and up-to-date information on a wide range of financial products and services.
- Visit Mustard.co.uk for more information on switching your car insurance or GoCompare.com for home insurance.
- For more money-saving tips, pick up the latest copy of Yours magazine