Crackdown on insurance firms to help loyal customers who pay up to 70% more
According to Citizens Advice, longstanding home insurance customers can pay £110 per year more than new ones
INSURERS face a crackdown on "excessive" differences in premiums for new customers and existing policyholders.
At present, insurers offer new customers discounted rates in order to attract new business, while loyal policyholders can often pay up to 70 per cent more.
It follows rules implemented by the City watchdog to force firm to display the previous year's premium on renewal letters to customers.
The new guidelines apply to home, motor and travel insurance but not for pet or health cover.
The ABI (Association of British Insurers) and Biba (British Insurance Brokers' Association) said the new rules will help long-standing customers.
According to Citizens Advice, longstanding home insurance customers can pay £110 per year more than new ones.
Last year, research by the Financial Conduct Authority in to the home insurance sector revealed that some loyal customers pay up to 70 per cent more than new ones.
Last year, comparison website uSwitch.com found that loyal motorists pay up to £1,000 a year more by staying with the same firm.
The associations' members will review their pricing approach for customers who have been with them longer than five years and assess whether their approach delivers a fair outcome.
Firms will make it clear at the outset to customers if the new premium includes any introductory discount for the first year, and that subsequent renewal premiums may be higher.
The ABI and Biba will publish a report in no more than two years showing actions taken to tackle excessive premium differences.
Each company will put the principles into action in their own way, those behind the plan said.
Gillian Guy, chief executive of Citizens Advice, said: "Today's announcement shows the industry recognises the scale of this problem and is willing to act responsibly to stop consumers being penalised for their loyalty.
"Our research found that longstanding home insurance customers can pay an average of £110 more a year than new customers.
"The devil, however, will be in the detail - whether this is successful will depend on prices actually coming down for loyal customers."
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ABI chairman Andy Briggs said: "These new guiding principles and action points are a positive initiative by the ABI and Biba members to demonstrate that the whole industry recognises this is an important issue that needs to be addressed."
Lord Hunt of Wirral, chairman of Biba, said: "I am so delighted that insurers and brokers have come together for the benefit of our established and loyal customers, setting out a positive path forward on renewal pricing.
"I would encourage everyone within the wider market to join with us in adopting these guiding principles and action points."
In 2016, The Sun revealed that insurance firms charge long-term customers as much as £50 in admin fees, a charge which is avoided by new ones.
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