Auto-renewal ‘trap’ still catching out millions of drivers
Research by GoCompare found 4.7 million people automatically let their insurer renew their policy for another year at their last renewal date, often at a higher price.
The practice costs motorists £1.2bn a year in higher premiums – a 22% increase in just six months, according to GoCompare.
Last year, the Competition and Markets Authority told car insurers they would face fines if they failed to properly explain to customers that their policies would automatically roll over.
In 2017, the Financial Conduct Authority introduced changes forcing insurers to show the previous year’s premium at each renewal so it can be directly compared to the new price.
However, GoCompare found most drivers missed key information that should be contained in their renewal packs.
Only 17% of drivers recalled seeing a statement in their renewal notice advising them to shop around for cover and only 43% saw the previous year’s premium alongside their renewal premium.
Most drivers said they wanted more renewal information – 32% would like more information through the post, 45% via email and nearly a fifth (19%) by text.
Almost half (47%) said that standard wording in plain English would ensure that renewal letters are consistent and easier to understand, and 40% think that customers should not be penalised for changing their minds after auto-renewing a policy.
Lee Griffin, chief executive of GoCompare, said: “Loyal customers deserve to be given clear information at renewal to help them decide whether to stick or switch.
“Auto-renewal means that drivers remain legally insured to drive, without having to engage in the renewal process. But that convenience can come at a very high price. Those who allow their policy to roll-over for another year can pay hundreds of pounds extra for the privilege. So, when people realise that they’re being penalised for their loyalty, it’s hardly surprising they want the system to change.
“Despite new rules to improve the information given to people and to encourage greater shopping around, not much has changed. Awareness of key renewal information remains low and the documentation currently provided by insurers seems to be doing little to engage millions of motorists in the renewal process.”
GoCompare has come up with a five-point plan to improve insurance renewals