Insurance renewal letters not making an impact
The majority of drivers are not seeing messages about the importance of shopping around for car insurance policies.
Under the FCA’s rules, introduced in April 2017, insurers are compelled to “clearly, accurately and prominently” display the proposed renewal premium alongside the premium paid the year before, and include a message to encourage customers to shop around.
But despite being in force for more than two years, the FCA’s requirements are having little impact on consumers’ awareness of key renewal information and are doing little to engage millions of drivers in the renewal process, according to GoCompare Car Insurance.
The price comparison site’s annual car insurance renewal survey highlights that consumer engagement has fallen in the past 12 months.
It found that 10 per cent fewer drivers recall seeing the renewal premium alongside last year’s price than did so when the rules were first introduced in 2017, and that the number of people checking their renewal letter for changes to the cover being offered has dropped by 10 per cent.
As a result, 4.1m drivers auto-renewed this year without checking if they could get a better deal and the average number of years motorists have been with the same insurer has increased to 3.1 years, compared with 2.3 years in 2017.
Nearly half of the motorists (47 per cent) surveyed said they don’t trust their insurer to reward their loyalty, believing insurers offer better deals to new customers than those renewing cover; 46 per cent of those surveyed thought this practice should be made illegal.
On 4 October, the FCA released the interim report of its market study into the pricing of home and motor insurance and announced a consultation on a series of proposals designed to restrict price rises at renewal and increase switching rates.
Lee Griffin, CEO, and founder of GoCompare Car Insurance, said: “It’s no secret that insurers entice new customers with cheaper introductory offers at the expense of their existing policyholders. When it comes to car insurance, loyalty can cost you hundreds of pounds – customers switching insurance with us, could typically save up to £239.693. So, existing policyholders have every right to be wary of their insurer’s renewal quote.
“The number of people allowing their car insurance to automatically renew, without shopping around to see if they could get a better deal, has actually fallen slightly this year, but that is likely to be due to the slow-down in premium inflation after a couple of years of steep increases.
“While many people shop around if they think their renewal price is uncompetitive, our research shows that a huge number still aren’t actively engaged in the renewal process. It may be that insurers have made auto-renewal too easy for some customers to change their habits, or that they simply don’t have the confidence to switch.”