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Big car insurance news for 2022: what the insurance pricing changes mean for you

You might have seen stories about a new insurance pricing regulation coming in 2022. You might have even heard that your renewal price won’t change, or could even be cheaper as a result - but this isn’t necessarily the case. Here’s what the rule change really means and what you can do about it. 

Person calculating car insurance premiums

Insurers have been charging loyal customers higher renewal prices even if there’s no change in their circumstances.

While some customers have seen higher prices every year simply for being loyal, new customers have benefitted from cheaper car insurance. 

This is known as ‘price-walking’, and the Financial Conduct Authority (FCA) put an end to it on 1 January 2022 with a new pricing regulation. 

There’s plenty of false information circulating that claims the new regulation means cheaper renewal prices for everyone. But this isn’t necessarily going to be the case.

In fact, car insurance premiums increased by £25 at the end of 2021, according to our car insurance price index powered by Willis Towers Watson.

Here’s what you need to know about the pricing rule and how you can still save on your insurance premiums. 

 

What do the changes to this insurance rule mean?

The changes mean that if you’re renewing your insurance you won’t be charged more than a new customer with a like-for-like policy.

Let’s take an example with two customers. One is an existing customer who’s renewing and the other is a new customer.

Both of these have exactly the same circumstances. For example, they:

  • Have the same mileage

  • Have the same car

  • Live at the same address 

Let’s say they’ve even bought the policy through the same website. 

They’re also getting the same level of cover. This means their policies are ‘like-for-like’.

Prior to the rule change, the new customer with the same circumstances might have got a cheaper premium. 

Now, the existing customer that’s renewing can’t be charged any more than the new customer with the like-for-like policy.

 

What’s happening with car insurance prices in general? 

A new car insurance policy could cost you £25 more now than three months ago, on average. This is the highest increase over a three month period in over four years.

Even with the new regulation, our research shows that if you’re renewing you could still see higher insurance prices. Over the last three months, insurers have increased renewal prices by £45, on average.  

Louise O’Shea, CEO at Confused.com says it’s highly likely insurance prices could continue to rise throughout the year: 

“The changes coming into effect in January could [...] trigger an increase in insurance costs, as companies are likely to look at how they price customers.

In the past, offering a significant discount for new customers often came at the expense of renewing customers, who saw their price increase. Without this to balance out the discounts, some individual insurers may need to increase their prices to even things out.”

The price rises could also be because people are driving regularly again, which means accidents are more likely. The cost of repairs, replacement and taking care of people involved in accidents is rising too. 

All this contributes to how insurers calculate the cost of insurance. And these factors could mean that the price of your premium could rise.

 

Does the new rule mean my car insurance renewal price will be lower?

The new rule change might make you think that your insurance price will be lower or at least stay the same. But unfortunately this isn’t likely to be the case.

If you’ve been loyal to your insurer for many years, you’re more likely to have experienced price walking. So you might see a drop in your insurance premiums when you come to renew.

But that’s not guaranteed. Particularly as so many factors affect the price of car insurance. For example, if you change your address or the amount of mileage you do.

It might also change depending on the average price of insurance. If the average price of insurance in the UK is higher than the previous year, you might find that your insurance price rises too.

This is why it’s still important to shop around. Because even if your circumstances don’t change, you might find an insurer that could offer you a better price.

 

If I’m not guaranteed a cheaper price at renewal, how can I save? 

Shopping around using services like ours  is still one of the best ways to save on your car insurance.

Almost half (46%)* of the people we asked who had a higher renewal price saved £64 on average by switching insurers.

But it’s not just people with a higher renewal that can save. Almost a fifth (18%) that had a cheaper renewal price, went on to save £46 when they used a price comparison site.

Compare car insurance quotes

 

Our tips for saving on car insurance:

  • Switch your car insurance provider - you might get a better deal

  • Be accurate when you’re declaring your annual mileage

  • Pay annually for your insurance

  • Improve your car’s security 

You can find more ways to save in our guide on cheaper car insurance

 

I’ve found a cheaper premium and my insurance isn’t due to renew. What can I do?

If you’ve found a cheaper price elsewhere, you could try and cancel your current car insurance policy.

But there’s often cancellation charges if you’re well within your policy term. It’s usually around £50, but it could vary depending on each insurer. 

If you’ve just taken your policy out or renewed most insurers offer a cooling off period. This is usually around 14 days. 

During this time, you shouldn’t be charged a cancellation fee. 

 

What do I need to do about the new insurance rules? 

The new rules don’t require you to do anything. But it’s worth keeping an eye out around the time of your renewal.

Remember: the pricing change doesn’t automatically mean that your insurance policy will be cheaper at renewal, so it’s worth shopping around.

The best time to get a quote for your car insurance is around 21 days before renewal. So try comparing car insurance quotes around that time to see how much you could save.

 

Who is the FCA?

The FCA makes sure that financial service firms and financial markets in the UK operate fairly for customers, businesses and the economy.

It regulates the conduct of around 51,000 financial services and firms in the UK.

The FCA introduced this rule to stop insurers from price walking. Their research found that consumers were paying a penalty for being loyal.

*Research carried out by One Poll on behalf of Confused.com of 2,000 UK drivers who have car insurance policies. This was conducted between 6 January and 11 January 2022.