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The change, which begins in January, is expected to save customers an estimated £4.2billion over a decade. It means those who have been unwittingly paying unreasonably high premiums – around six million policyholders – could have them slashed when the measures come into effect.
The changes will 'put an end to the very high prices paid by many loyal customers', the regulator said.
On average a new customer pays £285 for motor insurance while those who have been with their provider for more than five years pay £370.
'I saved £1,000 by finding a new provider'
Sam Devo's car insurer failed to reward his loyalty so he took his business elsewhere