New rules on insurance renewals will make it easier to compare deals

Do you shop around for the best insurance deals? Picture: Pixabay.

Do you shop around for the best insurance deals? Picture: Pixabay.

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New rules making it easier for insurance customers to compare deals rather than just renewing with their existing firm come into force on Saturday.

Firms selling products such as motor, home, travel, health and pet insurance will be required to give consumers a better understanding of their options when their policy comes up for renewal.

Renewal documents will need to show what people are currently paying alongside the renewal premium - so customers can easily spot the difference.

Firms will also need to provide information encouraging people to check their cover and consider shopping around for the best deal.

Companies will also identify customers who have renewed with them four or more times in a row, and give them extra messages about shopping around.

Renewal letters sent from April 1 must include this new transparency - and it is estimated consumers could save up to £100 million on their insurance renewals this year.

The requirements are being made by the Financial Conduct Authority (FCA), which previously raised concerns about prices increasing in a way that is not transparent at renewal, and longstanding customers paying more than new customers for the same insurance product.

Consumer trials by the regulator found that putting last year's premium on renewal notices prompts between 11% and 18% of consumers to switch or negotiate their home insurance policy.

While auto-renewing a policy can help customers, as it prevents people from forgetting and inadvertently going without cover, the FCA's research suggested that average premiums can increase in the first five years until they reach a plateau.

The Association of British Insurers (ABI), which has been pressing for the changes, said that while price is a factor, customers also need to make sure a policy suits their needs.

It said this is particularly important for policies such as health and pet insurance, where a claim made during the year could mean that the same cover may not be available when shopping around.

An insurer may increase premiums year-on-year even if someone has not made a claim, for other reasons.

For example, a customer's personal circumstances may have changed, due to switching their car or their job. This could affect how much of a "risk" their insurer perceives them to be.

Insurance premium tax (IPT), which is due to be hiked again in June, also affects the cost of policies.

James Bridge, the ABI's assistant director, head of conduct regulation, said: "Many customers already shop around for the best insurance deals at renewal.

"These changes should help more people see if their renewal quote has changed, and to decide if they want to shop around.

"The ABI has long called for changes to be made by the regulator so that all customers, regardless of from whom they buy their insurance, benefit.

"Customers should always remember to choose the cover that meets their needs, and not simply buy on price alone."

The ABI has a guide to help customers at renewal at www.abi.org.uk/Insurance-and-savings/Tools-and-resources/What-to-think-about-when-your-insurance-policy-comes-up-for-renewal.