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New rules force car insurance companies to end rip off annual renewals
From April 1st, new rules came into effect to protect car insurance customers from large price rises as a result of unclear auto renewals. Insurers must now tell their customers how much they paid for cover in the previous year when they send out their renewal forms so it is easier to perform a price comparison.
Research from moneysupermarket.com shows that collectively more than 8 million drivers will spend around £2.37 billion on their insurance premiums this year. It is thought that around half of these drivers will auto renew with their current insurer despite their loyalty not paying as insurers reserve the best deals for new customers and push up premiums for existing customers.
With too many people renewing automatically rather than looking at the cover they are getting and how much they are paying, the Financial Conduct Authority (FCA) has stepped in to stop people sticking with insurers and overpaying year on year.
The new rules will prompt drivers to take action with their premiums as drivers who have not switched providers for the last four years are likely to receive a letter stating they have been with the insurer for a number of years and the cover required may be at a better price elsewhere.
Anyone selling general insurance policies, whether a specialised insurance provider, bank or supermarket, will have to comply with the new rules. Assistant Director at Association of British Insurers (ABI), James Bridge, spoke to the Express about these new rules and warned that cheap cover is not everything; “Always remember to choose the cover that meets your needs, and do not simply buy on price alone.”
Recent research has found that price is an important factor when it comes to signing up with the insurance provider despite price rises largely being ignored when it comes to renewal. Two thirds of drivers are choosing their insurer because it is the cheapest deal on offer at the time regardless of whether it offers everything they need.
Premiums naturally rise at the end of the first year but alongside recent rises of around 16% over the last year, as a result of more expensive repairs and a change to the formula that calculates the cost of the average compensation pay out, premiums have risen by an average of £110 and could soon pass £1000 per year.
For the FCA and the ABI, it is a worry that many are taking the easy option which is often costing them 20% more than switching and gaining access to the cheaper deals available to new customers. The FCA will be keeping a close eye on the way insurers respond to the rules as some critics have commented that insurers may try to hide old premiums in the renewal reminders to keep customers in the dark.
Regardless of these rules, which are predicted to save drivers up to £103 million a year, there are ways to keep the costs of your car insurance down for yourself.
- Keep note of your car insurance renewal date so you can start to shop around for a new deal before you reach the end of your current deal.
- Don’t accept the first price you get from your current insurer. Check that it is competitively priced and see if you can negotiate on cost to gain a better deal with the insurer you are already with.
- Pay your premium annually if you can as it is usually cheaper. Insurers typically add interest onto your premium if you opt to spread the cost with monthly payments.
- Check that your details are still accurate. If you have moved house, changed jobs, started to do more or less mileage a year, then update your details to see if you can achieve a better price.
- Build up your no claims bonus and avoid add-ons to your policy if possible to try and cut the cost of your premium.
- If you are a younger driver or you are struggling to get the cost of your car insurance down, try getting a black box fitted in your car which should lower the cost of your premium if it is proven you are a good driver.