'Cheap car Insurance'

How to find it, and how how the insurers try to stop you.


You want cheap car insurance. They want to make a profit.

All motorists want the cheapest possible car insurance. Price comparison sites now help us to find the lowest quotes from hundreds of different offers, sometimes allowing us to save a great deal of money. Premiums have fallen in real terms, broker commissions have been cut to the bone. The problem is: the insurers and brokers still need to make a profit, so someone has to pay for these savings. Read on, and make sure that the person who picks up the bill isn't you.




Don't allow auto-renewal

The government, and the insurance companies, love you to automatically renew your insurance year after year. The authorities prefer it because it cuts the number of uninsured drivers on the roads; there is no longer the excuse that they 'forgot' to renew their policy. The insurers love it because selling motor insurance is highly competitive and very expensive; those catchy TV ads cost a lot of money. So, the more customers pay their renewal premium, the bigger they can grow and the more profit they can make. Oh, and since we are all busy people and it's much easier to accept a premium than start looking round for a better one it's fairly easy to edge that premium up year after year, and most customers won't even notice. It usually comes as quite a shock when motorists who have stayed loyal tothe same insurer for years realise just how much they could save by switching.

When you take out a new policy you'll be invited to agree to automatic renewal 'for your own convenience'. If you don't then you will, of course, run the risk of forgetting to make other arrangements but you will get plenty of notice when your current policy gets near to it's end and they'll send you a renewal offer anyhow. You then have three choices: There is a good chance that they will reduce it if you look like taking your business to a competitor. I have personally saved more than £100 just by making a phone call like this.




Beware of Optional extras

Many insurance brokers claim to make more money out of selling extras such as legal representation, guaranteed courtesy car, personal accident cover etc than they do from commission for arranging the policy. This is because they often represent poor value for money and so are very profitable. If you are offered some of these and turn them down you will often be offered a 'special deal' at a much reduced price. If you accept this, then you can be confident that they will re-appear on your next renewal advice - but this time at full price. Many motorists never notice, and the broker's bonus pot grows bigger. Don't fall for it.




Look Out For hidden Charges

Mid-term adjustments - or MTAs - are a huge source of income for brokers. These are changes you make to your policy during it's lifetime, and there is almost invariably a substantial charge for this.

When you fill in an insurance proposal form you give your insurer all kinds of information that they can base your premium on, such as your accident record, your occupation, where you park the car at night, etc. If any of these factors change you are obliged to inform your insurer, so that they can decide whether or not there is an increased risk of a claim that could warrant an additional premium. If you failed to do so it could give them the right to reduce any claim you made, or even refuse to pay out at all. There is the odd broker who will provide the first MTA completely free - a good marketing angle. Most of them will charge you a fee of about £25 for recording the change - not bad for a phone call lasting a few minutes, plus a couple of minutes for data entry - but some charge substantially more. We have seen charges in excess of £100 quoted, and high penalties like this do seem to be more common amongst offshore companies, the 'ultra-cheap' ones and the 'Internet Only' insurers. These charges are, of course, fully explained in their terms and conditions, which must be made available in plain English before you buy a policy. The problem is, as usual, few people bother to read them. Since they are part of the contract with the company, there is no point complaining afterwards!




Make Sure The Information you provide is Accurate

There were numerous complaints a few years ago about a certain insurer that offered policies, and accepted premiums, without doing any checks on how accurate the information was on the proposal forms. A couple of weeks later, the policyholders would be asked to send written confirmation of their entitlement to no-claims bonuses within 14 days. If these were not forthcoming within this deadline a charge of about £75 was made, and if it still didn't arrive the policies were cancelled. This became a major scandal and numerous complaints were made to the legislator at the time, the Financial Services Authority; but they were all turned down because, yes, the company's terms and conditions allowed them to do this. We haven't heard of any others pulling a stunt like this recently, but that doesn't mean it doesn't still happen.

Apart from actually reading the terms and conditions that the insurers publish, it is essential that you provide accurate information to them. Most of it they know already; a lot more data is shared between insurance companies than we realise. Can they do this? yes, it's there in their privacy policies, for those who read such things.




Be Wary Of protected no claims discounts

Many people believe that if they pay for a protected no claims discount they will be able to have an accident or two without having to pay more for their next policy. This is incorrect.

There are two parts to the total sum that the motorist has to pay. The first part is the basic premium; the second is the no claims discount, which is then deducted from this sum. If a motorist with a protected NCD has to make a claim, that NCD stays the same; but the basic premium is likely to increase, perhaps substantially! To put this into figures: The premium rise could, of course, vary a great deal, depending upon many factors. The only thing you could be fairly sure of, though, would be that the sum you would have to pay for your policy would increase, perhaps by a considerable sum. Plus your premium would stay higher, as a result of the accident, for several more years at least.

rather than pay the extra for a protected NCD, perhaps you'd have been better off paying the claim out of your own pocket and saying nothing to your insurer!




Don't be Loyal to Your Insurer

You may believe the insurance industry's advertisements, which portray them as kindly, friendly people, interested only in your welfare. They may well of course fit that description in some ways, but they are also business people who have a responsibility to maximise the value of their companies to their shareholders. Staying loyal to one company may be seen by some as a praiseworthy thing to do; but it could cost you a lot of money. So, don't be afraid to compare prices and benefits from several companies (and read their documentation carefully!) before renewing; if you get a better offer you can always ring your current provider and ask them to match it. You may well be pleasantly surprised.




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