Insurance firms are to be banned from offering lower rates to new customers from 1 January 2022.
The new insurance rule, which applies to motor and home insurance, will be introduced by the Financial Conduct Authority (FCA) to stop insurance firms from disadvantaging loyal customers in favour of new business.
Currently insurance providers tend to offer introductory rates to new customers but hike the price come renewal time, effectively penalising customers for their loyalty.
The FCA estimates the new regulations will save consumers £4.2bn over the next 10 years.
Related: Two thirds of drivers wouldn’t call their insurer first after a collision
Sheldon Mills, executive director, consumers and competition at the FCA, said: “Our interventions will make the insurance market fairer and make it work better. Insurers can no longer penalise consumers who stay with them.
“You can still shop around and negotiate a better deal, but you won’t have to switch just to avoid being charged a loyalty premium.”
The FCA is also introducing new rules to make it easier for consumers to cancel an insurance policy.
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