New rules are to be introduced to stop car and home insurers from imposing so-called loyalty penalties on customers, the financial watchdog has announced.
The Financial Conduct Authority (FCA) said it is cracking down on unscrupulous firms to end the practice where existing customers are offered quotes that are higher than new ones.
Regulators found last year that millions of customers were being unfairly charged higher prices, including an extra £1.2 billion in 2018 alone.
Insurers will be required to offer renewing customers a price that is no higher than they would pay as a new customer.
But those who regularly shop around for a cheaper deal, who are often younger customers, could end up paying more, with discounts becoming smaller and more scarce.
Martin Lewis has urged drivers to check their insurance as the changes could mean higher rates in the coming months.
He said: “While the new regime starts in January, insurers will likely start to shift their pricing algorithms beforehand – we think there may even be signs of it now (the data isn’t conclusive though).
“This likely means the cheapest prices disappearing rapidly for those who do comparisons and switch.
“Therefore I’d suggest everyone check car and home insurance ASAP to see if you can cut costs grabbing cheaper switchers’ deals, before things start to change.
“Even if you’re not at renewal, if you can find substantial savings, it can be worth moving now to lock in the cheaper prices.
“As long as you’ve not claimed, you can usually (check) cancel your existing policy for a £50ish admin fee, and get a pro-rata refund for the rest of the year (though you won’t gain this year’s no claims).”
The FCA admitted the changes are likely to bring an end to unsustainably low-priced deals to some customers.
But officials said that overall, consumers will save £4.2 billion over 10 years.
Many firms increase prices for existing customers each year at renewal in a practice known as price walking.
The FCA said: “This means that consumers have to shop around and switch every year to avoid paying higher prices for being loyal.
“It also distorts the way the market works for everyone. Many firms offer below-cost prices to attract new customers.
“They also use sophisticated processes to target the best deals at customers who they think will not switch in the future and will therefore pay more.”