Six million loyal home and motor insurance holders are overpaying by a total of £1.2bn by staying with their current provider with those on lower incomes among the worst affected.
The Financial Conduct Authority (FCA) found evidence of insurers overcharging long-standing home insurance customers through tactics such as selling policies to new consumers at a discount, then hiking the cheaper home insurance premiums when they renew.
Worryingly the report released today showed that firms specifically target consumers who are less financially-savvy and therefore less likely to switch to a better offer.
For consumers who bought combined contents and building insurance, lower income consumers (below £30,000) pay higher margins than those with higher incomes.
The FCA has estimated that around six million consumers pay around £200 too much on their premiums.
“At Emerald Life we are different. We offer a fairer and more equal experience to all our customers,” said Heidi McCormack, CEO and Co-founder of Emerald Life – the insurance startup dedicated to diversity and inclusion. “We do not mimic other insurers by hiking renewals for our most loyal customers.”
Christopher Woolard at the FCA said: “This market is not working well for all consumers. While a large number of people shop around, many loyal customers are not getting a good deal. We believe this affects around six 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.”