Dual pricing: The sneaky hidden cost inflating your car insurance premiums

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What is dual pricing?
The pros and cons of banning dual pricing
A fairer type of insurance

What is dual pricing in insurance?

Dual pricing (also known as price-walking, or the loyalty penalty) is a sneaky practice that some insurers use to get customers through the door.

They’ll offer you a super low premium for the first year. But when it’s time to renew your policy, they’ll bump up the cost of your car insurance, and hope that you won’t notice.

In 2018, around 6 million customers were overcharged due to dual pricing — paying a combined £1.2bn more than they would have if they were charged based on their actual risk.

We think this is really unfair. These insurers are charging existing customers more than they would charge a brand new customer, for the exact same policy — basically punishing them for being loyal, and not switching to a different provider.

Luckily, it seems like the Financial Conduct Authority (FCA) agrees with us - and it’s set out to ban dual pricing in the UK.

The FCA will ban dual pricing at the start of 2022

After that, insurers won’t be allowed to charge renewing customers any more than they would charge a new customer for the same policy.

This will have quite a few interesting effects for the insurance industry.

The cost of insurance might actually go up

After 2022, insurers won’t be able to give attractive offers to new customers, unless they can continue to offer those same rates the following years.

Some insurers might not be able to do that - so premiums for new customers could go up.

This is similar to what happened in 2012, when a European Parliament ruling meant that insurance could no longer charge young men more than they charged young women. The average premium for men didn’t go down that much (if at all) but it went up significantly for women.

We’re not sure if this is exactly fair, either. So hopefully insurance companies will start to spread out the introductory discounts that they used to offer, so that both new and existing customers can benefit.

There are some upsides though

Since insurance companies won’t be able to draw customers in with introductory offers that they can’t keep up, they might have to start improving their service offering if they want to stay competitive.

For example, some of them might have to look into offering better customer service (not to toot our own horn, but customer support is something that we do pretty well).

They might also start looking into different ways to help customers save on their policies.

And it’s one less dodgy trick that insurers can play on their customers, which may improve the reputation of the industry. After all, insurance is supposed to be a contract of trust!

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Better prices for better drivers — save up to ⅓ on your insurance with smart pricing. Learn more

What is the Financial Conduct Authority (FCA)?

It’s an independent public body that keeps an eye on the UK financial services industry.

Its main job is to make sure financial service companies give their customers a fair deal, and to protect customer’s money. Any company that provides regulated financial services in the UK must be FCA authorised - this includes insurance companies, banks, and many others.

Radically fairer insurance

We’ve never ripped off our customers with dual pricing. We just don’t think it’s right.

We also don’t believe in deposits, interest, or cancellation fees — and we won’t charge you extra if you pay monthly. With a Cuvva subscription, you just pay for each month of insurance before it starts.

Interested? Get a quote today.

Updated on 27th October 2021