The UK markets regulator plans to overhaul the way insurers price home and car coverage in a bid to save consumers £3.7bn (€4bn) over 10 years.
The Financial Conduct Authority said it is concerned these markets are “not working well for consumers".
The proposed rule changes would ensure that when people renew their policies they pay no more than new customers buying coverage for the first time. It would also be easier for clients to stop automatic renewal of their policies.
Home and car insurers use “complex and opaque pricing practices” and target increases on clients who are less likely to switch insurers, according to the FCA.
The regulator found in a study that 6m policyholders were paying “high or very high margins” in 2018, and would have saved £1.2bn if they had paid the average price for their risk.
The proposals would “put an end to the very high prices paid by some long-standing customers", interim FCA chief executive Christopher Woolard said.
The FCA seeks public feedback on its proposals by January 25, and plans to publish new rules next year.
UK providers of home and car coverage saw their shares fall — among them Admiral, AA, and Direct Line — after the FCA issued its proposals, which Morgan Stanley analyst Jonathan Denham said were tougher than expected.