The insurance auto-renew rip-off

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Price comparison website has done some number crunching and reckons drivers are throwing away around £2 billion each year by failing to shop around at renewal time.

That’s because many car owners stick with the same insurer, assuming that a low premium last time means a low premium this time too. According to GoCompare, 8.8 million drivers rolled-over their last car insurance renewal without checking for cheaper premiums, missing out on typical savings of around £240 each. 

8.8 million drivers rolled-over their last car insurance renewal without checking for cheaper premiums, missing out on typical savings of around £240 each.

The survey found that 31% of drivers have stayed with the same insurer for three years or more and nearly half (46%) of the 8.8m drivers who allowed their cover to automatically renew did so in the belief that because their insurer was cheapest last time they were bound to be good value this time around too.

Other reasons why drivers auto renew their policies include: 

  • Loyalty to an insurer which has ‘always looked after them'- 26%
  • Too much hassle, even if they can save money - 18%
  • They find car insurance confusing and lack the confidence to switch - 6%
  • Worried that they will lose their no claims discount - 6%

Of the 66% of drivers who didn't allow their car insurance to roll-over at their last renewal, 52% wanted to find cheaper cover and save money and 40% didn't trust their insurer to give them the best deal year after year. 28% believe they get a better deal as a new customer.

GoCompare’s Lee Griffin commented: "Millions of drivers are potentially overpaying for their car insurance in the mistaken belief that an insurer offering the cheapest premium one year is bound to offer the same good value the next.

“However, many drivers have found that insurers often offer the sweetest deals to new customers whilst pushing up premiums for their existing customers. Switched on motorists know that when it comes to car insurance, loyalty seldom pays.

Insurers typically send out renewal notices two to three weeks before a policy is due to come to an end and you should use this time to shop around to see if you can get a better deal. Many insurers will automatically renew your insurance unless you contact them to tell them otherwise and their letter will focus on the convenience of needing to do nothing at all in order for your insurance to continue.

That’s convenient if you're happy to proceed without first checking if your new premium is still competitive. Insurers review their pricing regularly for different risks so there's no such thing as a ‘best buy' car insurance policy which will be the best value year after year.

If you do decide to switch insurers to save money, don't forget to contact your old insurer in good time to advise them that you wish to cancel your policy when it expires. If you don't get in touch they may renew your policy using an existing direct debit and you could face a cancellation charge when you realise you've got two policies in force.

Types of car insurance cover

There are three types of insurance cover available, ranging from the minimum standard of third party, to the deluxe package, known as comprehensive.

In the middle there’s third party, fire & theft; this is often the minimum offered by many companies, because most claims are for accidental damage rather than fire or theft, so an insurer may as well lump those in with the collision cover.

Fully comprehensive 

  • Covers almost every eventuality, as it pays out whether you're at fault or somebody else.
  • Tends to be the most expensive cover, but not always as those who take out third-party cover only are more likely to be involved in a claim.
  • Sometimes insures the policy holder to drive any car (on a third party-only basis). But that other car must be insured on a policy of its own, and there may be restrictions on that other car's value and/or insurance group.

Third party, fire and theft

  • Covers only third-party costs after an accident, so if you're involved in an at-fault claim (ie it's your fault), your own costs aren't paid.
  • Covers theft of your own car, plus loss or damage to a third-party's vehicle if you're to blame for their losses.
  • Covers fire damage to your own car, however it's caused.
  • Doesn’t cover repairs to your car if the accident is your fault.

Third party 

  • The most basic form of insurance.
  • The legal minimum requirement in the UK.
  • Covers third party repairs only.
  • Doesn’t cover repairs to your car if the accident is your fault.
  • You're also not covered in the event of your car being stolen or catching fire.

It would be easy to assume that the best level of cover (fully comprehensive) is also the most expensive. But according to MoneySupermarket this isn't necessarily the case... 



Uninsured driving rife in the UK

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One in seven (15%) of UK motorists has admitted to breaking the law and driving at least once without insurance, according to new research by MoneySupermarket – with young drivers most likely to do it.

The price comparison site also found that 6% of motorists admit to knowingly getting behind the wheel of their own car with no cover, while a further 6% confess to borrowing someone else's car without insurance. 

Younger motorists are the biggest risk takers, with 30% of 18-34 year olds admitting to driving without insurance

Worryingly, 14% of those who owned up to having driven without insurance claimed they did so because they were unaware of the need for insurance behind the wheel.

Meanwhile, 26% blamed being in between insurance policies as the reason for hitting the road uninsured, and 7% simply couldn't be bothered to arrange cover. Unsurprisingly, 12% said they couldn't afford the insurance – that’s double the figure in the previous year’s survey.

Just as worrying is the 7% who reckon there’s no point having insurance as they don't think they’ll have a crash. Additionally, 12% said they just hadn't got round to renewing their policy yet, and were going to do so at a later date.

Younger motorists are the biggest risk takers, with 30% of 18-34 year olds admitting to driving without insurance, compared with just 5% of over 55s. Men were also twice as likely to drive with no insurance than women.

Peter Harrison, car insurance expert at MoneySupermarket, said: "It's astonishing how many drivers are still prepared to hit the road without insurance. Not only is it illegal but you could face thousands of pounds in liability, a conviction, six points on your licence and a hefty fine should you be caught out or be involved in a crash. To make matters worse, uninsured drivers cost the insurance industry £500 million each year, which as a result adds an average of £30 to every motorist's premium”.

For the full low-down on how car insurance works and how you can cut the cost of cover, log on to our insurance advice pages.

Why fronting is illegal

Your car insurance is as costly as it is, because as a young driver you’re statistically a bad risk. However, your parent – as an older, more experienced driver – is statistically a much lower risk, which is why their insurance costs are much lower.

Many families have latched onto this and are attempting to reduce insurance costs for their children by indulging in a bit of fronting. This is when a young driver is put onto a parent’s insurance policy as a named driver, when in fact they’re very much the main driver. Indeed, in most cases, the parent never even gets behind the wheel of the son or daughter’s car. 

Such a move might save you some cash, but it’s bad news as you’ll never build up your own no-claims discount, which ultimately allows you to slash your insurance bills. Also, if you have a crash, your parent will lose their no-claims discount, even though they may never have had an accident. The most obvious reason for not doing it though is because it’s an offence.

Hiding behind your parent’s name on the policy is fraud; you’re making a false declaration to your insurance company, and if you get found out your insurer can charge a penalty or cancel the policy. After this, getting fresh cover could be very costly if not impossible.

Yes, buying insurance as a young driver is painfully expensive, but sadly it’s also necessary – unless you genuinely do share a car with a parent, and they’re the main driver. A much better bet is to take out a telematics-based policy in your own name, as shown by our case study. That way, you should see the costs drop very quickly – as long as you drive safely.