Drivers are being charged up to £800m too much on their car insurance renewal, and are told that they needn’t do a thing by insurers rather than being encouraged to shop around, according to the findings of a new study by GoCompare Car Insurance.
The research reveals that, at their last renewal:
- 15% of drivers allowed their cover to automatically roll-over for another year, without checking whether the price they were offered was competitive,
- 43% of drivers renewed their insurance with the same provider, but only after checking other quotes,
- Just 39% switched provider.
- Based on this, GoCompare estimates that 3 MILLION UK motorists could be overpaying their car insurance by a collective £800m by auto-renewing.
New rules designed to encourage shopping around
While the practice of auto-renewal has gone on for years – causing one insurance boss to recently refer to the market as ‘dysfunctional’ – it has been thrown under a fresh spotlight by new FCA guidelines that require insurers to include last year’s premium in renewal letters.
As a result, insurers are now forced to tell their customers exactly how much they are putting their premiums up by, but they are still ‘reassuring’ them that they don’t need to do anything for their insurance to continue. While many people are wise to the practice – 58% of drivers say they know insurers save their best prices for new customers – millions are still lulled into bad deals by the convenience of having to do absolutely nothing to remain covered.
So why do people auto-renew?
Just over a third of Brits (35%) had auto-renewed because the renewal price offered wasn’t hugely different to last year’s premium. Other reasons for sticking with the same provider included:
- Loyalty (21%),
- A good experience with a claim (9%),
- And not feeling confident enough to switch because they find car insurance confusing (7%).
The main reason cited for switching was an increase in the renewal price (71%).
The reasons given for switching also included:
- People don’t trust insurers to tell them when they are paying too much for cover (37%),
- A feeling that insurers use underhand tactics to get existing customers to renew with them (17%).
Top tips to get the best car insurance deals:
- Give yourself time to review your financial arrangements – diarise your renewal date,
- NEVER accept your car insurance renewal quote without first checking that the new price you are being offered is competitive – even if your insurer was the cheapest last year,
- Compare prices AND check the small print. Make sure you’re making like-for-like comparisons and understand all the charges, any penalties, exclusions and terms and conditions you will be required to meet.