Insurance rules that came into force on January 1 could save homeowners and motorists hundreds of pounds.

The measures, brought in by the Financial Conduct Authority (FCA) mean that from January 1, 2022, insurers will be banned from quoting customers a higher price for renewing their home or motor insurance than they would pay if they were a new customer.

The new rules are expected to save consumers £4.2bn over the next 10 years.

The FCA’s reforms follow a review that uncovered that many insurers were increasing prices for renewing customers year-on-year – a practice known as price walking.

The FCA study found that millions of home and motor insurance customers lose out if they renew repeatedly with their current providers.

The authority said that in 2018, six million loyal policy holders would have saved £1.2 billion had they paid the average price for their actual risk.

The FCA’s new rules will stop firms 'price walking'. Insurers will be required to offer renewing customers a price that is no higher than they would pay as a new customer.

In addition to the new rules on pricing for home and motor insurance, the FCA is also bringing in new rules to:

• give most consumers easier methods of cancelling the automatic renewal of their policy

• require insurance firms to do more to consider how they offer fair value to their customers

• require home and motor insurance firms to report data to the FCA so that it can supervise the market more effectively

“These measures will put an end to the very high prices paid by many loyal customers,” said Sheldon Mills, executive director, consumers and competition at the FCA.

“Consumers can still benefit from shopping around or negotiating with their current provider – but won’t be charged more at renewal just for being an existing customer.

"We are making the insurance market work better for millions of people. We will be watching closely to see how the market develops in the future and to ensure firms continue to deliver fairer value to consumers.”

The FCA said it will review the effects of the new rules over the course of 2022, ahead of a full evaluation in early 2024.

However, the news could see some premiums increasing said LouiseO’Shea, CEO at

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

“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.

"While we don’t know how soon prices will increase, we’re confident that they will, and we all need to be shopping around to make sure we’re finding the best price and saving money where we can.”