Home insurance customers who stick with the same provider can find themselves paying £75 extra per year, research by Which? has found.
The consumer group said those who had held a combined buildings and contents policy for more than a year paid on average £270 annually.
However, it said new customers were paying just £195 for the same policy.
The Association of British Insurers (ABI) admitted the insurance market was “not working as well as it should”.
According to Which? the loyalty penalty was found to grow over time.
The group said customers who had been with the same insurer for more than 20 years paid around double the amount of what new customers paid.
For combined insurance, the average premium paid for a policy 20 or more years old was £396 per year, compared with the £195 new customers paid.
The consumer group, which surveyed 7,000 people, found 70% had been with their insurer for longer than a year.
Which? said that to beat the higher prices, some had decided to cancel an existing policy, then re-purchase it with a new customer discount.
Surprisingly, many insurers allowed policyholders to do this, it added.
Harry Rose, Which? money editor, said: “It is unacceptable that longstanding policyholders are taken for granted by insurance providers and hit by these excessive premiums.
“Customers who prefer to stay with one provider are at risk of being exploited by these vastly overpriced premiums when little has changed in the service they receive.
“Insurers must make sure existing customers remain a priority, and are not sidelined by the push to attract new business.”
ABI spokesman Malcom Tarling said: “We recognise that the insurance market is not working as well as it should for many long-standing customers.
“We want everyone to get the best deal in a competitive market, which is why we have launched an industry initiative to help those customers who do not shop around.
“This will include insurers reviewing the policies of customers who have been on their books for five or more years to ensure they are getting the best deal for their needs.”