Consumers ‘overpay by £1.2bn a year on car and home insurance’

Failings in the market for home and car insurance mean consumers are overpaying by about £1.2bn year, the City regulator has concluded.

In an interim report into the market, the Financial Conduct Authority said competition was not working and that loyal customers were being penalised.

Consumers who do not switch or shop around are not getting good deals, the FCA said.

It suggests action on automatic renewals and making switching easier.

“This market is not working well for all consumers,” said Christopher Woolard, executive director of strategy and competition at the FCA.

“While a large number of people shop around, many loyal customers are not getting a good deal. We believe this affects around 6 million consumers.

“We have set out a package of potential remedies to ensure these markets are truly competitive and address the problems we have uncovered. We expect the industry to work with us as we do so.”

These remedies include:

Banning or restricting practices such as raising prices for consumers who renew every year, or requiring firms to automatically move consumers to cheaper equivalent deals
Stop practices that could discourage switching – including restricting the way that firms use automatic renewal
Make firms be clear and transparent in their dealings with consumers – including improvements to the way they communicate with their customers

The FCA also said that it was considering whether firms should publish information about price differentials between their customers.

The authority intends to publish its final report on possible remedies in early 2020.

The insurance industry has yet to comment on Friday’s interim report. However, some insurers have already changed the way they do things, with some pledging not to charge more at renewal on some products.