Martin Lewis issues car insurance warning after FCA update – ‘price difference will fall’

Martin Lewis offers advice about cancelling car insurance

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After spending years urging drivers to shop around instead of automatically renewing their agreements to save money, Mr Lewis is now teaching the reverse. It comes after the Financial Conduct Authority (FCA) updated its rules to ban companies from price waking.

The new law means firms must offer existing customers similar prices to new customers and cannot increase costs slowly year by year.

It means drivers who switch to a new provider are unlikely to receive the bumper discounts seen in recent years.

Instead, the updates are “good news” for those who do not switch their agreements as prices are set to be cheaper.

The new rule change comes into force from 1 January 2022 so drivers still have time to get used to the changes.

Speaking on his MoneySavingExpert newsletter, Mr Lewis said prices would likely meet somewhere halfway”.

This means prices for existing customers will fall while costs for new customers are expected to be higher than current rates.

He said: “With firms forced to offer new and existing customers the same prices, the new structure will likely meet somewhere a little above halfway between them.

“It’s good news for those who never switch, as renewals will be cheaper.

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“But it’s bad news for those who actively seek the best deals.

“While they should still be able to save due to competition, differences will fall, and they’ll pay more overall.”

However, despite the new rules coming into effect from January, Mr Lewis warned insurers would likely make changes well before.

Therefore, he has warned the cheapest prices are likely to disappear rapidly” over the coming weeks.

He has urged drivers to see if they can quickly make use of cheaper costs by switching deals early to get on the best possible agreement.

He added: “It’s possible today is a sweet spot to check car insurance and home insurance prices.

“While the new regime starts in January, insurers will likely start to shift algorithms before – there are even signs now.

“This likely means the cheapest prices will disappear rapidly for those who compare and switch.

“So I suggest everyone check ASAP to see if you can cut costs by grabbing cheaper switchers’ deals.

“If you’re approaching the end of your policy, you could shop around for cheaper deal now.

“If you’re mid-policy, it’s still worth comparing prices.

“Even if not at renewal, if savings are big, it can be worth moving now to lock in cheaper prices.”

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