The City regulator finally stopped insurers always raising premiums for those who stick with them – but campaigners say the “scam” raises bills in the energy, mortgage, mobiles and broadband markets too. Consumer champions at Citizens Advice who exposed the “loyalty penalty” welcomed yesterday’s crackdown on insurance firms – then warned that tough action is needed elsewhere as well.

Six million home and car insurance customers are said to be in the loyalty trap while millions pay too much for gas and electricity. Matthew Upton, direcctor of policy at Citizens Advice said: “We’re pleased to see the [Financial Conduct Authority] setting the bar so high in stamping out this systematic scam.

“We now need to see similar action in the other markets.”

Insurers had routinely increased bills for customers who stayed with them, but offered heavy discounts to lure in fresh clients.

FCA officials yesterday said that from January 1 next year, renewal quotes for home and motor insurance can be no dearer than they would be for new business.

The watchdog admits the move is likely to mean firms no longer offer cheap deals to some customers, while trade body the Association of British Insurers (ABI) said it will hit those who often switch providers.

But the FCA believes customers will save £4.2billion over 10 years. It said many insurers raise prices for existing customers each year at renewal through “price walking”.

It gave as an example a new home cover customer typically paying £130 a year. For the same policy and after staying with the firm for five years, that rises to £238.

New motor insurance clients typically pay £285 but people who have been with a provider for more than five years pay £370, the FCA said.

Sheldon Mills, its executive director for consumers and competition, 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.”

He added: “We will be watching closely to see how the market develops…and to ensure firms continue to deliver fairer value.”

Gareth Shaw, head of money at consumer group Which?, said: “Companies have employed sharp pricing tactics to lure in customers before hitting them with eye-watering price hikes…so it is right that measures will finally be introduced to help put an end to these.”

Louise O’Shea, chief executive at Confused.com, called it a “watershed moment for insurance”.

Charlotte Clark, director of regulation at the ABI, said: “Insurers support these reforms and will continue working closely with the FCA.These remedies should ensure that all customers get fair outcomes.”

Citizens Advice said in 2018 eight in 10 bill payers faced “significantly higher prices” for staying put. The average loyal customer paid £877 a year too much if they kept the same supplier for mortgages, savings, mobile, insurance and broadband.

An FCA study discovered that 800,000 mortgage customers paid an average £1,000 a year more for their home loans than if they had shopped around. The regulator has yet to announce concrete action.

There are 11 million energy customers on standard variable or other “default” tariffs, many for years, but who pay some of the highest prices. The energy regulator Ofgem brought in a price cap but research showed customers could still save £234 a year by switching.