Insurance Renewal Pricing Rules UK: FCA PS21/5 Explained

What the loyalty penalty was and why the FCA acted

For years, many home and motor insurers used a practice known as price walking. A customer would be offered a cheap headline premium in year one, then nudged upward at each renewal on the assumption that loyal customers rarely shop around. The FCA's market study found that long-standing customers were systematically charged more than equivalent new customers, with the largest harm falling on people who did not switch or haggle each year.

The regulator concluded this was not a fair outcome. In September 2020 it published a market study, and in May 2021 it confirmed the remedy in Policy Statement PS21/5, "General insurance pricing practices". The core pricing rule took effect on 1 January 2022, alongside wider product governance, auto-renewal and reporting obligations.

The reform did not cap premiums or guarantee a low price. It targeted the differential between what an insurer charges a renewing customer and what it charges a comparable newcomer. Insurers remain free to price for risk, so a customer in a high-theft postcode or with recent claims may still pay more than someone with a cleaner profile.

The equivalent new business price rule in plain terms

The central obligation is that the price an insurer offers an existing customer at renewal must be no higher than the equivalent new business price (ENBP). The ENBP is the price the insurer would charge an equivalent new customer buying the same product through the same channel at that time.

Several elements matter here. "Same product" means like for like cover, excess and add-ons. "Same channel" means the route you bought through, such as direct online, a price comparison site, or over the phone, because insurers may legitimately price differently by channel. "Equivalent customer" means a new customer with the same risk characteristics.

The practical effect is that an insurer can no longer quietly inflate your renewal simply because you are an existing customer. If the firm would sell the identical policy to a stranger for less, it cannot charge you more for staying. Insurers must have systems and governance to evidence compliance, and they report pricing data to the FCA.

Auto-renewal and cancellation rights

PS21/5 also tightened auto-renewal practices. Firms must make it as easy to stop a policy renewing as it is to set it up. Renewal communications must clearly explain how to opt out of automatic renewal, and the disclosure must be prominent rather than buried in small print.

Separately, the disclosure rules in ICOBS require renewal notices to show the previous year's premium next to the proposed new premium for that policy, and to encourage shopping around where a customer has renewed several times in a row. This transparency lets you spot a steep increase and question it.

If you bought cover within the last 14 days, the ICOBS cooling-off right gives you a statutory cancellation window, typically 14 days for general insurance, during which you can cancel and receive a refund less any cover already used. That cooling-off right is separate from the renewal pricing rules but often relevant when a renewal completes automatically.

What the rules do not promise

It helps to be clear about the limits. The reforms do not guarantee that your renewal will be cheaper than last year. Underlying claims inflation, repair costs, vehicle parts prices and weather-related home claims can push premiums up across the whole market, and those increases are permitted because they reflect genuine cost and risk.

The rules also do not stop an insurer declining to renew, or changing cover terms, provided it follows its contract and gives proper notice. And they do not force every insurer to offer you the cheapest price in the market: the protection is internal to each firm, comparing your renewal to that firm's own new-business pricing.

Because of this, shopping around still matters. A rival insurer may price your risk more keenly, and you remain free to switch at renewal. The reform simply removes the penalty for choosing to stay.

How to challenge a renewal you think breaches the rules

If your renewal looks higher than what the same insurer advertises to new customers for identical cover, start by asking the insurer to explain. Request, in writing, the equivalent new business price for your policy and channel. Keep screenshots of any cheaper new-customer quote you obtain for the same product.

If the insurer cannot justify the difference, make a formal complaint. The firm must acknowledge it and has up to eight weeks to issue a final response under FCA DISP rules. If you are unhappy with that response, or you do not receive one within eight weeks, you can refer the complaint to the Financial Ombudsman Service.

The Ombudsman service is free for consumers and looks at what is fair and reasonable in the circumstances. It can require a firm to put things right, including refunding an overcharge. There is normally a six-month window to refer to the Ombudsman after the firm's final response.

Frequently asked questions

Does the renewal pricing rule apply to all types of insurance?

No. PS21/5's pricing remedy targets home (buildings and contents) and motor personal lines sold to consumers. Other products such as travel, pet or life insurance are not covered by the equivalent new business price rule, although broader fair-value and Consumer Duty expectations apply across general insurance.

Can my insurer still increase my premium at renewal?

Yes. The rules stop an insurer charging you more than an equivalent new customer for the same policy, but they do not freeze prices. If claims costs, repair inflation or your own risk profile rise, your premium can increase, provided you are not charged more than a comparable newcomer would pay.

What is the equivalent new business price?

It is the price the insurer would charge a new customer with the same risk characteristics, buying the same product through the same sales channel, at the time of your renewal. Your renewal quote must not exceed it.

How do I stop my policy renewing automatically?

Your renewal documents must clearly explain how to opt out of auto-renewal, and stopping it must be as easy as setting it up. You can contact the insurer to cancel automatic renewal before the renewal date.

Where can a suspected rule breach be reported?

Complain to your insurer first and allow up to eight weeks for a final response. If you are not satisfied, refer the matter to the Financial Ombudsman Service, which is free for consumers and can order a refund where it finds unfair treatment.