The concept of loyalty has been under severe strain this week. Dominic Cummings' excoriating denunciation of the mendacity and ineptitude of the Prime Minister and Health Secretary has been a seminal example of the evaporation of loyalty in a former colleague. It must have all been dreadfully upsetting for Messrs Johnson and Hancock, although hysterically funny for the rest of us. Like Oscar Wilde greeting the news of the death of Little Nel, one needed a heart of stone to read Mr Cumming's evidence to the Health Select Committee without laughing.
And so respect is due to the Financial Conduct Authority for restoring some value to the notion of loyalty. They've announced measures that will mean that loyalty no longer comes at price when renewing your home or car insurance. The problem has been the practice of "price walking", whereby customers who renew their insurance are offered less favourable prices than new customers. This is fine if you have the time and inclination to shop around every time a policy comes up for renewal, as well as internet access, so you can visit the price comparison websites. But if you don't have that time or those resources, or if you actually have a life and better things to do with your time, "price walking" is a pain in the ....neck.
For the insurers, however, price walking has been a nice little earner. The FCA calculates that in 2018, 6 million policy holders would have saved £1.2 billion had they paid the average price for their actual risk, rather then staying loyal to their current insurer.
The FCA's new rules mean that renewing customers must be offered a price no higher than a new customer. They also require insurers to provide consumers with easier ways to cancel auto renewals; to give greater consideration to how they offer fair value; and to provide data to the FCA, so that it can supervise the insurance market more effectively.
Of course there will be losers, specifically the kind of "weirdos and misfits" that shop around for the lowest premium every year, or who Mr Cummings used to think should be working at 10 Downing Street, back in the days when he had a say in such matters.
In our view, however, its great to see the FCA end this week, of all weeks, by demonstrating that there should not be a price on loyalty when it comes to buying car insurance. And as a man with poor eyesight who occasionally has to drive all the way from London to Barnard Castle just to get an eye test, we hope Mr Cummings is suitably grateful.
But, somehow, we doubt it.
"These measures will put an end to the very high prices paid by many loyal customers. Consumers can still benefit from shopping around or negotiating with their current provider – but won't be charged more at renewal just for being an existing customer." Sheldon Mills, Executive Director, Consumers and Competition at the FCA
Originally Published by Lewis Silkin - AdLaw
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