By Kevin Peachey Personal finance reporter
Households receiving insurance renewal quotes will be told how much they paid the previous year to compare prices, under new proposals.
A trial by the Financial Conduct Authority (FCA), found that including the previous year’s premium on renewal notices prompted people to shop around.
The City watchdog said there were concerns that loyal customers were paying higher prices for insurance.
An insurers’ trade body said it would welcome such a rule across the board.
The proposal is designed to assist those who have stayed with the same insurer for a long period of time and are unaware of the possibility of cheaper prices elsewhere.
A trial last year found that including the previous year’s premium in a renewal notice prompted between 11% and 18% of those on the trial to switch provider or negotiate a cheaper premium.
The FCA is now proposing all renewal notices sent by general insurance providers include this detail.
“We hope the proposals encourage more people to shop around for the best product for them,” said Christopher Woolard, director of strategy and competition at the FCA.
The watchdog wants feedback on the plans by March but has not proposed a specific start date.
Huw Evans, director general of the Association of British Insurers (ABI), said: “Publishing last year’s price alongside the renewal quote up front is a good idea which insurers themselves proposed to the FCA last year.
“This will help customers and encourage them to engage with the policy they choose and what they get for their money. It will take time to implement such a big change across the whole insurance industry and we will work closely with the FCA to ensure this welcome reform is delivered on a realistic timescale.”
Andrew Hagger, of financial website Moneycomms, said: “Hopefully this move will shake up some of the less competitive insurers and drive down the cost of cover, whilst the ability to see price increases in black and white will undoubtedly prompt greater levels of switching.”