Auto-Renewable Car Insurance Costing Motorists Heavily

December 10th, 2019
Auto-Renewable

Every year, 3 in 10 motorists simply accept the renewal quote offered by their current insurer, but this means motorists in the UK are over paying by £2 billion. Typically this is due to the motorist incorrectly thinking that the deal they were on is the same as last year or better as they are a loyal customer.

To combat this, insurers have been asked to provide the current tariff and the renewal tariff to be placed on the same letter, this small change will allow consumers to note the difference immediately and insurers will have to rethink their sneaky strategy. An FCA spokes person said, “The ABI wrote to us earlier in the year and we are working on many projects. We will report back in 2015 but would support a voluntary industry code”

Auto-renewals

Since the law change in 2011, car insurers have been allowed to auto-renew customers unless they cancelled their policy to ensure “drivers don’t fall between policies”. Typically the insurer writes to the motorist up to 35 days before the policy expires to let them know the new premiums. But if the motorist doesn’t respond to say they don’t need the cover, the insurer will auto-renew without the motorists consent meaning they have lost the opportunity to find a better deal.

Renewal premiums

According to the Association of British Insurers (ABI), the average car insurance premium is now £536 which, surprisingly, is cheaper than 2 years ago. This has been confirmed by Tower Watson, AA and the ABI as they believe the drop to be between 11% – 14% in the last 12 months – but this drop is unlikely to be offered as a renewal quote to people whose policy auto renews.

However, insurers believe the premium charge is in line with the level of risk which is calculated by their software. Which looks at the insurance premium trend nationwide and it assesses the risk against their insurance book (the value and risk of paying on a claim). In some cases the factors are outside your control -Perhaps the premium may go up due to an increase in the number of claims from that postcode or perhaps an increase in the level of car theft. However insurers such as Direct line claim that more than 2 out of 3 customers have their renewals drop or stay the same.

Haggle

Whilst it’s annoying, customers can negotiate with their current insurer to get a cheaper deal on their car insurance- often this can be 10% off the renewal quote. Which? Spokes person commented, “Should you really have to work hard to get your prices down if your insurer can insure you for less?” …which seems like a fair question from the authors view point.

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