Are you still paying the 'loyalty penalty' for insurance?

January 2022 marked a big shake-up in the insurance world, with the arrival of new rules designed to protect car and home insurance customers from the 'loyalty penalty'. 

Previously, the longer you stayed with your insurer, the more you paid – especially if you didn't haggle each year. New customers, meanwhile, benefitted from discounted prices.

Six months after the new rules came in, we surveyed more than 14,000 Which? members with car or home insurance to find out how much they were paying and how their premiums have changed since they last renewed. 

While, on average, the premiums they were paying decreased (slightly) across the year from May 2021 to June 2022, large numbers of customers still saw their premiums go up when renewing this year.

However, we also found that the few who negotiated with their insurer or shopped around were able to save significant amounts. 

Here, we reveal how much negotiating and switching saves people who try it, and how to ensure you're getting the best price from your insurer.  

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How much should you be paying?

Customers in our survey paid £360 on average for car insurance policies bought before the end of December 2021. For cover bought between January and June 2022, the average annual price paid was £343 – down 4.6%. 

Home insurance premiums dropped by 0.7% – from £332 to £329.

Yet while the average premium dipped, a substantial number of customers still saw hikes. When asked what they'd paid in the previous year, 43% of Which? members with car insurance and 51% with home insurance reported a rise in their premium between 2021 and 2022. 

The average increase for drivers was £35, while for home insurance customers, it was £41. 

Customers who'd stayed with their existing car or home insurer were more likely to have experienced a hike – 50% of those who'd renewed this year were paying more than they had last year, compared to 31% of those who switched provider. 

Average premiums paid

Pressure on prices

Confusingly, some customers will have paid more because of the loyalty penalty ban. 

Until the start of this year, customers who regularly switched insurer benefited from new customer discounts, which are now no longer available.

Last November, when we surveyed Which? members about how they thought they'd be impacted by the new rules, three in 10 told us they expected to pay more as a result.

However, as this year has progressed, numerous other factors have added to insurers' costs when it comes to paying claims – putting pressure on premiums more broadly. 

These have included higher prices for second-hand cars, shortages of materials and labour costs, and more 'normal' levels of road traffic and accidents – compared to lengthy periods of lockdown during 2020 and 2021. 

As a result, car insurance prices are now on the rise. According to industry trade body the Association of British Insurers, home insurance prices have been generally falling since the beginning of the year – but are up for new customers.

• Find out more: car insurance premiums increase

Why you might not be getting the best price

Although insurers can no longer use the length of time you've been their customer against you, you still aren't necessarily getting the best price by accepting their renewal offer. 

In fact, even testing if the renewal quote matches what an 'equivalent' new customer would get is extraordinarily difficult, as how and when the quote is run can have a significant effect.

Channel specific pricing

Insurers can still charge different prices to customers who approach them through different 'channels'. 

For example, if you bought your policy over the phone last year, your renewal offer might not be as good as the same quote as you'd get online. And it may vary again if you look at prices on comparison sites.

Time and date

Insurers' prices can change on an hourly basis, meaning the renewal offer you're sent may be higher or lower than a quote you obtain a few days later. 

Brand

Some of the larger insurance firms sell similar products under different brand names – and sometimes at very different prices. This makes it all the more important to shop around.  

Negotiation

Under the rules, insurers are still allowed to reduce your price if you negotiate. And our research suggests that many still do, though only a minority of customers take the opportunity.

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Why you should haggle and switch

Our survey strongly suggests that haggling pays off: a quarter of Which? members discussed their price with their insurer at renewal this year. 

Of these, around half (48%) saw a reduction in their price for their efforts. Seven in 10 who tried found it easy to do.

On average, hagglers saved £56 on their car insurance and £54 on their home insurance – larger than the average amounts premiums had risen by for those who'd experienced hikes.

Switching insurer also tends to lead to a lower price. Among customers in our survey who didn't haggle, those who switched car insurance this year were paying £43 less, on average, than those who'd stayed. 

Home insurance switchers paid £103 less.

• Find out more: see our readymade haggling script

What if you find a cheaper version of your policy through a comparison site?

Ideally, when shopping around, you should check what deals an insurer offers through comparison sites (and preferably more than one), as insurers can sell at different prices on comparison sites than they do directly. 

When we surveyed Which? members who'd negotiated their renewal price, a number told us they'd found cheaper quotes from their current insurer when shopping around online. 

More often than not, when they challenged this discrepancy with their insurer, it matched the lower price. One told us doing this saved them £115.

Other customers cancelled their existing policy and purchased the cheaper one through the comparison site. 

If you're doing this, check carefully that the new policy is actually the same as the one you're cancelling, or that at least it provides the cover you want. As well as offering different prices, insurers sometimes sell less comprehensive versions of their policies on comparison sites.  

'I'm a reluctant negotiator'

Which? member David (pictured above), from Sevenoaks, doesn't think of himself as 'traditionally a haggler'.

However, haggling has become a routine part of renewing his insurance, as well as his broadband and Sky TV. He has two cars, both of which are covered under separate policies with LV.  This year, he saved £66 without having to switch.

He found that the premium for one of his LV policies had risen by £121 to £495. He checked quotes on comparison sites and found alternative policies starting from £319 – though not all had the features he was after. The best fit was an M&S policy for £420.

When he spoke to LV, it said it no longer 'matched' other providers' prices, but agreed to see what it could do. David was ultimately offered a renewal quote of £468 (a £27 saving). While it didn't beat what he'd found elsewhere, he opted to stay.

In July, he went through a similar process with the second policy, knocking a £782 quote down to £743 (saving £39). David says he'd rather not have to haggle, but accepts that regular negotiation has become a necessary part of getting a decent price. 

• Find out more: how to get cheap car insurance

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