Don't get caught out by your insurer

Published:
21 August 2008
Topic:
News,Insurance,Money,Car

An increasing number of insurers are renewing motor insurance policies automatically unless the customer specifically asks for the cover to be cancelled. The result is that millions of drivers could be paying more for their insurance than they need.

An automatic renewal certainly has a number of advantages - it removes the hassle of signing new contracts and just makes life easier for those who are happy with their provider's service. However, it also takes away the impetus from consumers to shop around and find a better deal - with many not remembering until after the renewal date and then assuming it's too late to do anything about it. They then stick with the same insurer for another year, even though they could probably get cheaper cover elsewhere.

What are the insurers doing?
When your car insurance policy is up for renewal you may expect to receive a letter in the post. However, our research has discovered that many insurers don't send renewal letters at all - and instead simply send a new policy, which catches people out.

Recently one consumer informed us that she was not sent a renewal notice by her provider 28 days before her policy's expiry, as is the legal requirement. Instead she was simply emailed by the company to 'congratulate' her on her new policy. Even more frustratingly, when she attempted to contact the company to cancel her policy she was told to pay a £25 cancellation fee even though she was within the 'cooling off' period - this is a 14 day period in which consumers can, by law, cancel a new policy.

Thankfully this consumer was wise to the practices and eventually the insurer backed down over the cancellation fee - but other motorists may not have been so lucky.

Automatic renewals, or tacit renewals as they are also known, can have serious consequences if they happen without a consumer's knowledge or consent. For example, if you pay by credit card or direct debit, money could be taken from your account without you expecting it - and even worse, if you no longer use the same credit or debit card and have changed address it could lead to a 'default' on your credit profile harming your chances of gaining credit in the future.

For the insurers however, it's simply a retention tactic to hang on to customers. It seems an increasing number of providers are hoping consumers will simply forget about their renewal dates and not bother to shop around. However, it is always worth comparing quotes from different insurers, even if your current provider gave the most competitive quote last year and the renewal quote looks ok. The chances are you'll be able to get a better deal elsewhere.

What should the insurers be doing?
In 2006, the Information Commissioner's Office issued a note for good practice on automatic renewals. It stated that policies can be renewed automatically, but that individuals must understand this and have agreed to it.

For example, on a paper application form the intention to automatically renew must be made clear and prominent - on the internet there should also be a clear and prominent statement of this intent and consumers should have to check a box to indicate their agreement.

It is also deemed 'good practice' to send a reminder to the individual informing them of the intention to renew in case their details have changed. By contrast, 'bad practice' would be to only include automatic renewal details in the terms and conditions of a policy and not draw attention to it - and then to renew the policy without checking details are still valid.

How can consumers get the best deal?
If you fall foul of questionable practice from your insurer then don't assume its too late to take action - by law, all insurers are required to give consumers 14 days to cancel a policy and some will allow you to do this without charge. Others levy a charge even within the cooling off period although you can dispute this if you think it is excessive.

Even if the 'cooling off' period has expired, it could still be worth cancelling your policy and moving elsewhere. Simply compare the provider's cancellation fee (usually in the region of £25) to the money you could save elsewhere. If you could save £40 a year with another policy, it's still worth cancelling and moving on.

Research has found that only a third of car insurance customers (32%) have switched their car insurance within the last year with one in ten having never switched or been loyal to their provider for ten years or more. It seems however, that this loyalty is misplaced - the Association of British Insurers estimates drivers can save as much as 35% on their premiums if they compare car insurance quotes from five providers.

So rather than just accepting your existing insurer's renewal quote, use a car insurance comparison tool to compare the rates you could be enjoying elsewhere - our tool compares quotes from more than 60 providers. According to research by Consumer Intelligence, customers could save up to 50% on car insurance by shopping around in this manner.

There are other ways to save cash too - here are our top five tips:

·         Drive safely - According to Sainsbury's car insurance, 65% of motorists perform some sort of dangerous activity when behind the wheel such as talking on a mobile phone, eating or drinking. Drive safely and reduce your risk of an accident to take advantage of no-claims discounts.

·         Tighten security - If you can prove to your insurer that your vehicle is not a high theft risk you could earn a discount. Park in a garage at night and ask your insurer to recommend an alarm or immobiliser.

·         Agree to a higher excess - Think about what you can comfortably afford to pay in the event of an accident as the higher the excess, the lower your premiums will be.

·         Restrict yourself to a mileage limit - If you use the car infrequently see if your insurer will offer a discount for driving only at certain times of the day or for agreeing to a mileage limit.

·         Consider an advanced driving course - Many driving courses, such as the Pass Plus, can earn drivers discounts. However, you should weigh up whether the cost of the course will offer a saving significant enough to make it worthwhile.

Have your say: Have you been caught out and found your insurance has been renewed automatically, or do you have any tips for other drivers whose policy is coming up for renewal? Visit our forum and let us know.

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