Loyal customers should not pay more for home or motor insurance than new clients, the Financial Conduct Authority has said, as it promises reforms in the sector.
The FCA said the changes could save consumers up to £3.7bn over the next 10 years.
The new rules would apply to any customer buying or renewing a policy through the same point of sale, such as online or over the phone.
The FCA said it had identified 6m policyholders who were paying “high or very high margins” in 2018. If they had paid the average for their level of risk, it said they would have saved £1.2bn a year.
“Firms use complex and opaque pricing practices that allow them to raise prices for consumers that renew with them year on year,” it said in a statement this morning.
“While some people shop around for a deal, many others are losing out for being loyal. Firms target price increases on consumers who are less likely to switch and use practices that make it harder for people to leave.”
The FCA said it is also exploring other new measures to boost competition and fairness for loyal customers, such as rules to require insurance firms to consider if their products offer long-term value for all customers.
Firms could also be required to report data to the FCA so it can check the rules are being followed, and update their technology to make it easier to stop automatic policy renewals.
“We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in future, and put an end to the very high prices paid by some long-standing customers,” said Christopher Woolard, interim chief executive of the FCA.
“The package would also ensure that firms focus on providing fair value to all their customers.”