FCA proposals could save consumers £3.7 billion over 10 years

It means that for existing consumers, their renewal price would be no higher than the equivalent new-business price.

The proposals from the Financial Conduct Authority (FCA) would apply through the same sales channel. For example, if the customer bought the policy online, they would be charged the same price as a new customer buying online.

Firms would be free to set new-business prices, but they would be prevented from gradually increasing the renewal price to consumers over time – known as “price walking”, other than in line with changes in a customer’s risk.

The FCA set out a package of proposed remedies to help ramp up competition between providers, as it published the final report of its market study into the pricing of home and motor insurance.

The regulator said it is concerned these markets are not working well for consumers.

Firms use complex and opaque pricing practices that allow them to raise prices for consumers that renew with them year-on-year, it said.

The FCA identified six million policyholders paying high or very high margins in 2018.

If they paid the average for their risk, they would have collectively saved £1.2 billion.

The FCA estimates that its proposals will save consumers £3.7 billion over 10 years.

It will monitor the impact of the proposals on the market and is seeking feedback by January 25 2021.

Christopher Woolard, interim chief executive of the FCA, said: “We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in future, and put an end to the very high prices paid by some long-standing customers.”