Insurance
Drivers pay £2bn auto-renewal ‘loyalty tax’
Millions of drivers auto-renewed their car insurance without shopping around for a better deal, leaving them up to £300 out of pocket.
UK drivers are collectively wasting an estimated £1.9bn a year by allowing their car insurer to auto-renew their policy.
And with September being the peak month for car insurance renewals, drivers are urged to compare policy prices, helping them save up to £289.
The research by comparison site GoCompare Car Insurance revealed that 6.7 million motorists have been caught out by the ‘loyalty tax’ in the past year, without checking to see if they could buy identical cover for less.
It said there has been a 40% increase in the number of drivers leaving their insurance to roll-over without checking other quotes.
Over a fifth allowed their cover to auto-renew, up from the 15% who admitted to this six months ago.
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In fact, GoCompare said the number of drivers auto-renewing without shopping around is at its highest level since February 2017.
When drivers were asked about why they auto-renewed, a fifth said it’s because their insurer was the cheapest last time while a similar number stayed put because they had reduced their payments or taken a premium holiday due to the coronavirus.
Other reasons for sticking with the same provider included loyalty (22%), concern over the hassle and ease of switching (17%), and worries over the loss of no-claims bonus (11%).
The research found that on average drivers have been with their current insurer 2.9 years. A third of drivers have stuck to the same provider for three years or more, while 15% have stayed loyal for over five years.
‘Car insurance premiums are falling’
Lee Griffin, CEO and founder of GoCompare Car Insurance, said: “September is traditionally one of the busiest months for renewals due to historic new car sales. Our research shows that millions more drivers are not actively engaging with the renewal process this year, potentially leaving themselves hundreds of pounds out of pocket by effectively paying a ‘loyalty tax’. Drivers who are still paying their premiums really need to carefully consider their options and shop around to see what other insurers are willing to offer them.
“The good news is that car insurance premiums are falling due to less traffic on the roads and fewer claims. As a result, some drivers may actually see a premium reduction on their renewal letter, however that is the signal that they could probably get an even better deal elsewhere. It only takes a few minutes to compare policies and prices, and most of the information you need to do this is in your renewal notice. Just over half of customers using our site could save up to £289, making it time well spent.”