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 use introductory discounts for cheaper home insurance such as our price match offer where we aim to beat your existing renewal by up to 10%. However, 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.”