Why Is My Renewal More Expensive?

Gemma Chisholm
3 days ago
2 min read

You open your insurance renewal email expecting a similar price to last year… and suddenly it’s jumped by £100, £200 or even more.

No claims.

No changes.

No obvious reason.

So what’s going on?

The truth is, insurance renewals have worked differently for years — and many people who simply let their policy roll over ended up paying more than they needed to.

The “Loyalty Penalty”

For a long time, insurers were criticised for charging loyal customers more over time.

This became known as the “loyalty penalty” or “price walking.”

Basically, if someone renewed year after year without checking prices elsewhere, some insurers gradually increased the premium because they believed that customer probably wouldn’t switch.

The UK Financial Conduct Authority (FCA) found:

“6 million policyholders were paying high or very high margins in 2018.”

It also estimated those customers:

“would have saved £1.2 billion” if charged average pricing for their risk.

Source: Financial Conduct Authority (FCA)

That’s a huge amount of unnecessary extra cost for people simply staying loyal.

How Did Insurers Know Who Would Stay?

Insurance companies use a lot of data and technology to price policies.

The FCA found some insurers were:

“targeting increases at those less likely to switch.”

Source: FCA Market Study Summary

In simple terms, insurers could look at customer behaviour and make educated guesses about who was likely to just accept the renewal.

Things like:

how long you’d been with them,
whether you usually switched,
and how price-sensitive you appeared to be

could all influence pricing models.

One report even described insurers allegedly using:

“a computer pricing algorithm” to identify “the probability of customers staying loyal” if prices increased.

Source: News.com.au report on pricing algorithms

Sounds a bit unfair, doesn’t it?

Didn’t The Rules Change?

Yes — and this was a big win for consumers.

In 2022, the FCA introduced new rules stopping insurers from charging renewing customers more than new customers for the same policy.

The FCA said:

“renewal quotes for home and motor insurance consumers are not more expensive than they would be for new customers.”

Source: FCA Pricing Reform Rules

But that doesn’t mean your renewal will always be competitive.

Prices still change because of:

inflation,
repair costs,
theft trends,
claim levels,
and insurers changing how they price risk.

So even if your insurer is following the rules, another provider might still offer better value.

Why You Should Always Compare at Renewal

Renewal time is the perfect chance to check:

are you still getting a good deal?
does the policy still suit your needs?
are there better cover options elsewhere?

And remember — it’s not just about the price.

One policy might include:

breakdown cover,
legal protection,
lower excesses,
or better cover limits

while another cheaper policy might not.

That’s why it’s worth spending a few minutes comparing before you automatically renew.

The Bottom Line

Insurance companies use huge amounts of data and pricing technology behind the scenes. And while the FCA has improved things massively, renewal prices can still creep up over time.

That’s why it’s always worth shopping around before accepting your renewal quote.

A quick comparison could help you: