Two insurance bodies have announced plans to help close the gap between insurance renewal premiums and deals often reserved for new customers.
The Association of British Insurers (ABI) and the British Insurance Brokers’ Association (BIBA) issued a set of Guiding Principles and Action Points (GPAPs) earlier this week, in an effort to prevent loyal customers from overpaying for their insurance. The new guidelines apply to general insurance products including car, home and travel policies.
Closing the loyalty gap
The best insurance rates are often reserved for new customers, so those seeking the best deal are shopping around every year for each of the insurance policies they hold.
The new guidelines could help to prevent this, closing the gap between premiums for existing and new customers.
The industry is already taking action to stop policyholders from paying more year by year, by requiring insurers to display customers’ previous premiums.
Will this stop premiums rising?
The new guidelines are not guaranteed to put an end to price rises.
The GPAP framework promises to “address some of the issues in the current market that can lead to excessive differences between new customer premiums and subsequent renewal premiums.” However, it remains to be seen what is considered “excessive” under the guidelines.
The new guidelines are not designed to stop renewal prices from rising completely. In fact, one of the guidelines requires insurers to highlight the fact that subsequent renewal premiums may be higher than the year-one price.
It’s also important to bear mid-term adjustments in mind. If any of your circumstances change during the term of a policy, it’s possible your premium could change – and it’s still likely to go up if the risk to the insurer is greater (e.g. you’ve bought a more expensive car or moved to an area with a higher crime rate).
While insurers won’t be legally obliged to follow the new guidelines, members of the ABI and BIBA are expected to implement the “ethos and approach” outlined in the plans in an effort to make pricing fairer for insurance customers. ABI and BIBA aren’t regulatory bodies so don’t have any authority over companies that aren’t members – and insurers aren’t required to be a member of either body.