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Important rule changes to the pricing of home and motor insurance – what it could mean for you

What is changing and why?

From 1 January 2022, new pricing rules introduced by the industry’s regulator, the Financial Conduct Authority (FCA), will come into force. The changes will mean that when existing home and private motor insurance customers renew their insurance policy, the price charged by the insurance provider cannot be more expensive than the price that they charge to an equivalent new customer for the equivalent policy.

We welcome and called for these changes that will remove excessive price differences in the premiums paid by some new and existing customers for the same policy.

Insurers could not have made these changes alone, as people buy their home and motor insurance from different sources, not just from insurers. This is why we had asked the Regulator to act to ensure that these rules apply whether you buy your home or motor insurance from an insurer, insurance broker, price comparison website or a retailer, such as a shop.

It is important to remember that, as the Regulator has acknowledged, “We expect that our remedy package will probably lead to some consumers paying higher prices if they currently benefit from significant new business discounts as inducements to switch.” (FCA Market Study, September 2020).

In the same report they also point out that: “Regular switchers gain and can potentially sustain low (even below cost) average prices, while customers who do not search or negotiate pay higher prices on average and so cross-subsidise the switchers. Our proposed remedy would eliminate this cross subsidy and so may lead to higher prices for regular switchers.”

Read on below to find out how these important changes will affect you, and what you need to consider when renewing your current home and motor insurance, or shopping around for new cover.

What to remember when your home or motor insurance policy is due for renewal.

Choose the policy that best meets your needs, which may not be the cheapest. We all want the best product at the best price. When buying insurance, it is crucial that you buy the policy that most closely meets your needs, not automatically opting for the cheapest cover.




If considering renewing with your current insurer, check the renewal terms. Read your renewal documents carefully to make sure that the cover best meets your current needs, and that you are aware of any changes to the price, scope of cover, new conditions, and any changes in your circumstances that you need to tell your insurer about. Speak to your insurance provider or broker if unsure. 

Some of the discounted deals on offer now, may not be available when the new rules begin. As the FCA has said, these changes could lead to fewer and lower introductory premiums for new customers. 




It could still pay to shop around. The insurance market will continue to be competitive, with a wide range of policies available from a range of providersSo, it could still pay to shop around, ensuring of course that you buy the policy that best meets your needs, and not automatically opting for the cheapest policy on offer.  

Your renewal premium may still go up. Factors such as if you have made a claim in the last year, if your risk has changed, (for example, if you have added another driver to your motor policy), or external factors such as increases in the costs of vehicle repairs can all impact on the price of your insurance at renewal. 

These changes will apply to whoever arranges your insurance. These changes will apply regardless of whether you buy insurance from an insurer, insurance broker, comparison website or retailer.  



Auto renewal option will continue. Some policies renew automatically for a further year if you do nothing. This can ensure that you do not find yourself inadvertently uninsured because you forgot to renew – being uninsured could result in you driving illegally, or your home not being covered against expensive and traumatic events, such as a flood (and potentially being in breach of your mortgage). Your renewal information should clearly state if an auto renewal option applies.  

The new rules will make it easier to cancel the auto-renewal of some policies. If considering this, you should think about any factors that may contribute to you forgetting, or not being able to renew your policy when the time comes to do so. For example, due to a busy period at work, or because you are likely to be on holiday at that time.  

Remember that failing to renew your policy will mean that you are left uninsured. 


Will the cost of my current home and motor insurance policy fall as a result and, if so, by how much?

Your premium is calculated by your insurer independently, using a wide range of factors. For example, for motor insurance, your age, type of vehicle, your driving record and claims history will typically be relevant. So, it is impossible to generalise, as each customer is different.

However, these reforms aim to ensure premium reductions for many renewing customers.  

Why did the FCA decide to apply these rules only to motor and home insurance - what about other products like travel and pet insurance?

Home and motor insurance are the most widely held insurances that are most regularly renewed, and where any price differences between new and existing customers are most common. There are 27 million private motor insurance policies in force, and 18 million home insurance policies.

Will these changes apply if I arrange my insurance through a price comparison website, insurance broker or retailer?

Yes, these changes will apply regardless of who you buy your insurance from.

Will my insurer be ready for these changes?

Insurers have been working flat out to be ready for these significant changes and will do everything possible to ensure the transition is as smooth as possible. The FCA will supervise compliance across the market.

Why have premiums charged to some new customers been less than for existing customers for an identical risk?

Discounts to attract new customers are a common feature of many competitive markets, not just insurance. In some cases, existing customers may have had a policy with wider cover than that available to new customers, which is reflected in the price. This is why you should always compare cover, and not just price, when considering switching your insurance. 

Will any policy discounts for measures such as having an approved burglar alarm be affected?

Providers will still be able to offer specific policy discounts to customers.

The FCA has said that some customers who switch regularly could lose out as some of the new customer discounts may be reduced, so is there any point now in shopping around?

Yes, there is. The home and motor insurance markets are, and should remain, highly competitive, with a wide range of policies available at different prices, from a range of providers even if the scale and availability of some of the introductory premium discounts is likely to reduce. It remains important that you do not simply buy on price alone but ensure that the policy best meets your needs.

Can I simply renew my cover with my existing insurer if I wish?

Yes, you can. The most important thing is to ensure that your policy most closely meets your needs.

If I am not comfortable shopping around, where do I start?

We appreciate that for some shopping around for insurance may seem daunting, but it does not have to be.

See our guidance above to help you make informed decisions when renewing your cover or shopping around.

What about auto renewal of motor and home insurance policies – will this still continue?

Where used, auto renewal ensures that motorists and homeowners do not inadvertently find themselves uninsured – with potentially disastrous consequences. Drivers without cover would be driving illegally. Homeowners without building cover could be in breach of their mortgage conditions, being unprotected during times of considerable emotional and financial stress, for example if they suffer a flood, fire, or burglary.  

Where policies include auto renewal, this should be clearly and prominently indicated in renewal documents. You can stop your policy from auto-renewing and decline any auto-renewal option at the time of buying cover or at renewal.

For more information please see our motor insurance and our home insurance pages.