Customers who renew their home or motor insurance will not be charged more than new policyholders after the financial watchdog put an end to companies charging a loyalty penalty. People who automatically renew their policy with their insurer are often charged higher premiums than new customers, who tend to be offered the best deals. The Financial Conduct Authority (FCA) found that on average new customers paid £285 a year for motor insurance, while customers who had been with their provider for more than five years were charged £370. In the home insurance market, new customers paid £165 a year for buildings and contents cover, while after five years, premiums had increased to £287. It said its ban on the practice of price walking, where insurance premiums go up as a matter of course year on year rather than because the risk is higher, would save consumers £4.2bn over 10 years. About 10m policies in the home and motor insurance market are held by people who have been with the same provider for five years or more, and many could see their premiums fall as a result of the ban, which comes into effect in January. For customers who shop around each year, it could mean the end of the very cheapest deals available. The FCA said many insurers offered below cost-price deals to attract customers and used sophisticated processes to target the best deals at customers who they thought would not switch in the future, so would end up paying more. Sheldon Mills, the executive director, consumers and competition at the FCA, said: “These measures will put an end to the very high prices paid by many loyal customers. “Consumers can still benefit from shopping around or negotiating with their current provider – but won’t be charged more at renewal just for being an existing customer.” The ban follows a super-complaint from consumer groups about loyalty penalties paid by customers in the mortgages, savings, mobile, insurance and broadband markets. Matthew Upton, a director of policy at one of the groups, Citizens Advice, said: “We’re pleased to see the FCA setting the bar so high in stamping out this systematic scam and we now need to see similar action in the other markets. “No longer will loyal insurance customers face price-walking – gradual year-on-year increases – that can leave them paying way over the odds. Instead, firms will have to do the right thing and offer them the same deal as a new customer. “For us, and those loyal customers, this fix cannot come soon enough.” Gareth Shaw, the head of money at Which?, said: “For far too long, insurance companies have employed sharp pricing tactics to lure in customers before hitting them with eye-watering price hikes and exorbitant premiums, so it is right that measures will finally be introduced to help put an end to these unfair practices.” Shaw called on the FCA to do further work to see if there were other practices in the insurance market that should be prohibited. Mills said the FCA was “making the insurance market work better for millions of people” and would be “watching closely to see how the market develops in the future and to ensure firms continue to deliver fairer value to consumers”.