How to beat soaring car insurance costs

Motorists are getting a shock when their car insurance comes up for renewal because prices are rocketing. Premiums have risen by around 20% over the past year, according to The AA. But don’t despair, there are still ways to beat these rises.

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The rapid rate of inflation in the car insurance market means it is more important to shop around to find the best quote. Research from Consumer Intelligence, an independent market research company, found that 97.6% of drivers could save money by using moneysupermarket.com to compare and buy their car insurance and the average saving made was £224.25.

We look at why prices are soaring and answer the questions people commonly ask about why quotes can differ. Read on to find out how you can guarantee the best deal on your car insurance.

My quote is a lot higher than last year, why is this?

If you have received a renewal quote from your existing car insurance provider, chances are it will be higher than the premium you’ve paid over the last 12 months. The Association of British Insurers (ABI) says that this is not down to claims, but the legal costs associated with compensation payouts.

Such costs can add around 10% to premiums paid by all motorists, for example, with a personal injury claim for £10,000, every £1 paid in compensation adds a further 76p in legal costs.

The problem is being exacerbated by ‘ambulance chasers’ – companies that contact people who have made a claim on their car insurance due to an accident, regardless of how minor. They encourage drivers to claim against the other person involved for injuries commonly associated with car accidents, such as whiplash. Obviously injured road users should be able to claim, but there's a risk that people are being encouraged to make claims they would not otherwise demand. The problem is that this is pushing up the cost of insurance cover for all drivers.

The other main reason why your renewal quote is probably higher than last year is because insurers tend to offer their best prices to new customers. They know that most people don’t bother to shop around each year and will just stay with them. When it comes to insurance there is often no reward for loyalty.

Research we carried out at moneysupermarket.com found that drivers stay with the same insurer for an average of 2.8 years and one in five of us just automatically renews without comparing the renewal price against quotes from other providers. We are wasting a staggering £1.6billion a year through this brand ‘loyalty’.

With prices on the up generally, it’s more important than ever to ensure you’re getting the best deal on your car insurance.

Will my quote be cheaper if I go direct?

There is a common misconception that you will get a better price if you go direct to the insurer than you will if you by through a comparison site. This shouldn’t happen.

Certainly as far as moneysupermarket.com is concerned, the agreements we have with insurers generally state that they have to offer the same price via our site. In many cases, you can even get a better deal – it is often cheaper for insurers to acquire new customers via comparison sites than through their own advertising and marketing. Our insurance teams also work hard to negotiate exclusive offers that you can’t get if you go direct to the provider. For example, we are currently offering a 10% discount on Kwikfit policies.

We currently compare 127 prices from 111 insurance providers, which is why 98% of drivers are able to save money through moneysupermarket.com.

Some people are also suspicious of comparison sites and whether they can trust the information on them because we get paid by providers. We have an article that explains exactly how we make money, which you may be interested to read for more information.

Why then have I had a cheaper quote elsewhere?

If you have used a number of comparison sites and got a quote directly from the insurer, you shouldn’t find that the price for the same insurer varies, assuming all things are equal.

However, if the quote was based on a slightly different scenario, there could be a discrepancy. You therefore need to make sure that you’re comparing quotes that were made on a like-for-like basis. For example, one way to manipulate the price is to alter the excess.

With car insurance, you will have to pay a compulsory excess that is set by the insurer, but you can also opt to pay a voluntary excess. There is an ABI code that says what best practice is when displaying the excess but not everyone adheres to it. moneysupermarket.com follows the ABI’s guidelines and the default voluntary excess is set at £250. However, if you get other quotes from elsewhere and the default is set at a higher amount, it could result in a lower quote.

When comparing quotes from different sources, it’s therefore really important to make sure the prices are calculated on a like-for-like basis.

The other main reason why you may have got different prices is because insurers change their prices frequently. The price they’ll quote an individual can literally change numerous times during a single day.

This is because the insurers set a risk profile of their overall insurance book and will therefore adjust their prices depending on what type of driver they are looking to attract. For example, if an insurer is short of male drivers over the age of 50 living in a certain area, it will price more competitively for someone fitting that profile. If, however, it has enough drivers of that profile, it will come back with a more expensive quote because it doesn’t need that business at that moment in time.

As you can imagine, the risk profile will fluctuate continuously as new customers buy policies, which is why you can be quoted different prices from the same insurer.

Top tips for getting the best deal on your car insurance:

  • Don’t just renew with your existing insurer. Always compare prices. You can compare more than 100 policies in three minutes using moneysupermarket.com’s comparison tool.
  • Buy now. Car insurance premiums are rising so quickly that it makes sense to check prices and buy as soon as your renewal quote comes through. It could cost you more if you wait until the last minute.
  • Don’t buy on price alone. The cheapest quote may not offer the level of cover you need.

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