Auto-renewal trap: save up to £275 switching car insurance
New rules come into effect on 1 April requiring insurance companies to include last year’s premium in renewal notices as well as a message informing motorists of the benefits of shopping around for cheaper deals.
But MoneySuperMarket research reveals that over eight million drivers will continue to overspend by a collective £2.37bn in the next 12 months by automatically renewing their insurance.
The price comparison site said currently more than half of the UK driver’s (53%) auto-renew with their existing provider and it believes this number will remain “stubbornly high” even after the new Financial Conduct Authority (FCA) rule comes into effect next week.
Further, 33% also admitted that without a reminder about the previous year’s costs, they wouldn’t know by how much their premium was increasing.
For drivers who did automatically renew their insurance without comparing prices elsewhere, 30% said they were happy with the cost, 20% had a separate quote matched by their insurer and 18% liked the customer service offered by their current provider.
Kevin Pratt, consumer affairs expert at MoneySuperMarket, said: “It’s blindingly obvious the new rules are not stringent enough to create a switch-and-save culture. The majority of drivers (63%) chose their insurer because it offered the cheapest deal at the time but, when it comes to renewal, 11% don’t even check the new cost of their policy.
“A huge number of motorists will continue to auto-renew even after the FCA’s ruling comes into effect and pay more than they need to. Until and unless switching becomes a habit, providers will remain unmotivated to offer the most competitive rates to loyal customers. Shopping around is the best way to find the most competitive price and that can mean a difference of up to £275 every year.”
Pratt said there are “massive” upward pressures on car insurance premiums.
“We already know about the 20% increase in insurance premium tax in June and insurers are also suggesting that reforms to the way personal injury pay-outs are calculated will add a further £50-£70 to annual premiums. That makes it more important than ever to be proactive about securing the best deal possible.”