Money Saving Expert Martin Lewis has issued an urgent car insurance warning to every driver in the UK as the laws are set to change.
He shared an update with shoppers on Thursday’s instalment of the Martin Lewis Money Show – which airs on ITV.
From next year, home and car insurance providers will be banned from charging a ‘loyalty premium’.
That means they won’t be able to charge customers who renew every year more – just because they know they’ll stay.
And while that’s good news, Lewis warned that it will mean customers are likely to see less competition in the market.
“There’s a big rule change coming on January 1,” he said.
“Car, motorbike, van and home insurance are all affected. This is the end of the loyalty premium and the end of price walking.
“That means if you automatically renew your policy, your insurer will no longer be able to push up the price year after year.”
Lewis said it’s likely that existing customer prices and new customer prices will meet in the middle – meaning there could be less competition.
“In other words, the savings are going to drop dramatically for people that compare and save each year,” he explained.
The changes kick in in January but Lewis warned many insurers will start to update their prices to reflect the law change in the next month.
“That means the window of opportunity to bag a cheap deal is now.”
Issuing advice to viewers, he said it’s worth checking if you can save – even if your renewal policy is six months away.
“If you do find you can save substantially, start a new policy, cancel the old policy and ask for a refund on the outstanding time period.
“Providing you have not claimed, you should get a pro-rata refund minus around £50 in admin fees.”
If you’re near renewal, he says the perfect time to get quotes is 23 days before your car insurance policy expires, or 21 days for home insurance.
“The reason for this is that if you leave it until later, insurers categorise you as a higher risk person and charge you higher.”
Lastly, he shared some advice for those shopping around.
“Two different comparison websites could have different prices for different insurers, so use two or more.
“Some insurers like Direct Line are also not on comparison websites, so check these individually,” he said.
“And if you want to stick to your provider, find the cheapest deal and contact them to match it or haggle it lower.”
Those on the hunt for a lower deal may be able to save more through a cashback website such as TopCashback or Quidco. Some pay up to £70 when you join through them.
He added: “Lastly, insurance policies are like loans, so pay upfront, and you’ll pay the least.”
New ‘price-walking’ rules from January 2022
Many firms increase prices for existing customers at renewal in a practice known as price walking.
They use sophisticated processes to target the best deals at customers who they think will not switch in the future and will therefore pay more in the long run.
It’s part of the reason why people are encouraged to shop around and switch every year.
At the same time, these companies are offering below-cost prices to new customers to lure them in.
The FCA’s new rules will ban price walking from January next year.
The law change will protect people from the so called ‘loyalty premium ’.
In a nutshell, it means your renewal price will not be higher than it would have been if you joined the same company as a new customer.
It said these measures will save consumers £4.2billion over 10 years, says the Mirror.