Martin Lewis unveils simple car insurance loophole ‘everyone misunderstands’

Martin Lewis has explained a simple car insurance renewal rule “everyone misunderstands” which could see motorists miss out on major savings.

The Money Saving Expert founder revealed how insurance firms get away with charging existing customers more despite a ban on price walking.

Martin stressed companies have to charge existing policyholders the same rate as new customers obtained through the same channel.

Meaning, the rule allows for new customer rates to fall using different websites despite securing a similar or almost identical policy.

He explained the simple loophole during the latest episode of the BBC’s Martin Lewis Podcast.

He said: “Price comparison sites included in this ruling that you can’t charge existing customers more than new customers. But, this is the bit everyone misunderstands. The rule is channel-specific.

“So the rule says you cannot charge an existing customer more than a new customer who went through the same route as that existing customer did originally.

“So if you went direct you cannot charge them more as a direct customer. If you went via a specific comparison site you cannot charge them more than a customer of that specific comparison site.

“The crucial wording here was instead [you] went to a special new comparison site, so by definition, you could have not gone to it in the past because it was new.

“Therefore because you must have gone via a different channel in the first place because it is not the same comparison site, the rule does not apply.”

The Financial Conduct Authority (FCA) banned car insurance firms from gradually increasing rates from January 2022.

The FCA claimed removing the loyalty penalty would save consumers a staggering £4.2billion over 10 years.

Martin stressed this is exactly why customers should still shop around for a better deal ahead of renewal to make sure they secure the best rate.

He added: “So just to express this to everybody out there as this is an important rule.

“Those people that think price walking and loyalty has gone because you must always be charged the same as a new customer, it’s only going through the same route that you did.

“It’s quite a narrow interpretation of it. So what they could do is they could be a new site where they give discounts that you don’t get because you went direct or you went via a certain comparison site.

“Which is why the rule about don’t auto-renew, always check the cheapest price you can get and you may still find that your own insurer is offering you a cheaper price via a different comparison site than the one you originally used.

“Now often they will match it once you talk to them and you tell them but they don’t legally have to unless it’s exactly the same route.”

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