The insurance industry has launched an initiative aimed at trying to prevent loyal customers paying excessive insurance premiums.
The Association of British Insurers (ABI) and the British Insurance Brokers Association (BIBA) announced a plan today to help tackle premium differences between new and existing customers.
The bodies, which represents insurers and brokers respectively, have issued a set of guiding principles and action points (GPAPs) which they say will help prevent loyal customers paying excessive premiums.
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The principles apply to personal insurance products such as home, motor and travel.
Under the plan, members of the two bodies will commit to try and prevent excessive differences in premiums between new and existing customers.
They will also commit to making it clear that new customer premiums will only apply in the first year and subsequent renewals may be higher, to review their pricing for customers who have been with them for longer than five years and to take action so that customers' tendency to shop around at renewal does not lead to excessive price differences that penalise long-standing customers.
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ABI chair Andy Briggs said: “Insurers do a great job for their customers, providing peace of mind and financial help when they most need it, but the renewal market simply doesnt work where loyal customers get charged much more than new customers.
“Given many consumers expect to get cheaper insurance when they shop around, there is no easy solution. These new guiding principles and action points are a positive initiative by the ABI and BIBA members to demonstrate that the whole industry recognise this is an important issue that needs to be addressed.”
The ABI and BIBA have said that they will issue a report in two years time on how effective the guidelines have been in reducing the difference between premiums paid by new and existing customers.
Georgie Frost of price comparison site GoGompare welcomed the new guidelines but warned consumers not to "take their eye off the ball".
“Well be able to see how effective this move has been in the ABI and BIBAs joint report in two years time. But until then, drivers and homeowners must stay vigilant and fight back against rip-off renewal premiums, which can cost as much as £280.
"The message is simply, never trust your insurer and auto-renew. Compare with the rest of the market and if you think your loyalty is being rewarded with excessive pricing despite these new principles, switch to one wholl give you a better deal for the cover you need."
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