Car Insurance: How your policy could change in 2020 under radical new proposals
Car insurance policyholders were found to be paying more than necessary for cover, according to a scathing report from the FCA last year. Unfair pricing structures were uncovered as it was revealed loyal customers were hit with monthly price increases for staying with the same provider.
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The FCA revealed 11 percent of renewed car insurance policies were more expensive than new agreements as it was revealed six million motorists were not getting a good deal.
The group revealed one in three of those customers paying high charges were considered vulnerable customers on low incomes.
The FCA revealed a series of steps to improve the car insurance industry such as a plan to crack down on renewal prices.
The proposals could come into effect in 2020 which could see motorists hit with radical changes to their agreements in a bid to save them money.
Under the excising scheme, policies are sold at discounted rates to new customers to encourage them to join.
Prices are then slowly increased to the full rate which means motorists end up paying more.
The FCA is considering banning insurers from setting prices this way in order to make the system more fair for motorists.
Insurance providers also calculate how likely you are to renew a contract for another term and will aim their best prices at those who may be more likely to switch.
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How is your price calculated?
Car insurance prices are based on a variety of factors such as the crime rate where you live, what job you have and how many miles you drive per year.
Insurance providers work out your premiums based on how likely you are to claim on a policy with higher prices set for those who are perceived to be a higher risk on the road.
However, the FCA has suggested companies should make more information available about how prices are worked out.
This means costs paid by different customers that are of a similar risk could be revealed to expose any unfair price hikes for certain demographics.
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Is your deal actually reasonable?
The FCA has said it wants insurance providers being more proactive in helping vulnerable customers to review their policy agreements.
One idea would be for car insurance companies to automatically switch their customers to better deals when they become available rather than leaving them to pay more.
Some insurers have encouraged vulnerable cisterns to switch agreements but others have been criticised for not helping enough change onto cheaper schemes.
It may become easier to leave your car insurance provider
Some car insurance companies may only set up a policy to auto-renew if this is something you have specifically asked for.
However many car insurance policies often place customers onto auto-renewal setups like this without informing the customer first.
This could leave motorists locked into agreements for another year without being informed of how they could have cancelled.
The FCA wants to stop firms making it hard for customers to cancel their agreement by ensuring policyholders are asked about auto-renewal before signing up.
Restrictions may also be placed on the number of times a policy can be auto-renewed as a way to make the process more fair for customers.
Use data to grab better deals
The FCA thinks allowing customers to use their data to find better deals and switch between companies will force car insurance firms into better practices.
Customers could soon use apps and websites to access information about their financial services which will allow them to become more informed.
Seeing how much you pay for car insurance compared to other similar policies will allow motorists to identify cheaper options and switch providers with ease.
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