Aviva launches new PAYG home and car insurance that guarantees you won't be charged more than new customers

The move is a bid by the insurer – which says it's the UK's largest with 15million customers – to crack down on the so-called "loyalty premium".

This is where existing customers end up paying more than new users and is an issue the competition watchdog is currently investigating following a super complaint made by Citizens Advice.

Aviva found that 82 per cent of its customers believe new users getting a better deal is unfair. It says the guarantee is the first of its kind in the insurance industry.

Of course, the guarantee only means you won't pay more than existing customers – it doesn't mean prices won't ever rise.

How to keep your home insurance premiums cheap

Blair Turnbull, managing director of Aviva UK digital told The Sun: "At their next renewal, we guarantee customers will get the same or an even better price than if they were a new customer to AvivaPlus.

"This doesn’t mean that their renewal price won’t change from last year’s, but it’s a guarantee that they won’t pay more than if they were a new customer."

Under Aviva's shake-up, customers will also make monthly payments with no interest charged, and they won't have to pay fees to cancel or change policies.

The insurer currently charges about £32 and £42 to cancel its respective home and car insurance policies, and about £9 and £30 to change its respective home and car insurance policies.

As part of the move, Aviva's new Plus range will be split into three tiers: basic, regular and premium.

When it comes to how much these new policies cost, Mr Turnbull said: "AvivaPlus cover isn't directly comparable to Aviva 'standard', so the prices may be different; some customers may get a cheaper price with AvivaPlus but others may pay more.

"In broad terms, the ‘regular’ tier of AvivaPlus is comparable price-wise with Aviva’s standard product."

There have been fears that Aviva's new product could drive up insurance prices, but experts say it's too early to tell for sure.

Editor-in-chief of comparison website MoneySuperMarket, Tom Flack, commented: "It’s hard to say at this stage if this will affect prices across the industry.

"We don’t anticipate this launch having a massive impact on premium prices, but any increase in competition is good news and we hope others follow suit. Competition is what brings price down."

Sabrina Webb, insurance expert at comparison site uSwitch added: “It is always encouraging to see innovation within insurance, especially given the changes the motoring industry is going through with autonomous and electric vehicles on the cusp of being mainstream on our roads.

“And while it is commendable that Aviva is seeking to challenge the current renewal system that often leaves customers who choose not to switch away paying a higher premium.

"It is also important that this new type of insurance product doesn’t result in an increase in the average price for all motorists."

How to save on car insurance

At present, Aviva's new Plus policies are only available on the firm's combined contents and buildings insurance and its fully comprehensive car policies.

It says it's looking to expand this to to more home and motor policies – and possibly to its travel and health insurance range – in future.

If you're an existing customer and you want to get the deal, you will have to switch to one of Aviva's new AvivaPlus policies – although the insurer says it will waive any cancellation fees if you do this.

But insurance experts are in agreement that shopping around is the best way to cut prices.

Mr Flack said: "To really drive down your insurance premiums nothing beats shopping around.

"Each insurer has its own reasons for wanting to win new business and may be specifically targeting certain types of driver, classes of vehicle or even particular postcodes just when you need to renew.

"Only by shopping around can you know if you’re getting the cheapest deal. It really doesn’t take long and the potential annual savings on offer are significant – up to £276 on car insurance and 42 per cent on home insurance.”

Ms Webb added: “As with all new financial products, it always pays to do your research.

"By taking a few minutes to calculate how much you will pay each month and totalling it up to get a yearly figure, you can compare if this new deal is actually better or worse value than a deal you can get from another insurer.”

We revealed earlier this week how drivers could save £85 by taking out car insurance in February – plus five other ways to cut bills.

It's not only the month that can influence insurance prices, we reveal the best day of the week to buy car insurance – and drivers could chop £570 off bills.

Plus, we've got some top tips on how to lower your car insurance premiums and get cashback.

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