UK motorists continue to throw £652.5 million a year into auto-renewal black hole despite FCA changes

UK motorists continue to throw millions a year into auto-renewal black hole despite FCA changes
  • FCA enforced changes in April 2017 make little difference, with less than half of Brits even noticing last year’s price displayed on their renewal letter
  • Third of Brits still automatically renew their car insurance policy with their existing insurer instead of shopping around and potentially saving money
  • A typical annual increase of £50 per policy means £652.5 million going down the auto-renewal drain every year1
  • Motorists who avoid the ‘loyalty tax’ and shop around could see average savings of up to £278.49 each2 – or £3.6 billion collectively3

This coming Sunday (1st April 2018) will mark a year since the Financial Conduct Authority (FCA) auto-renewal bill changes came into force, but new research from MoneySuperMarket today reveals UK motorists are still collectively wasting £652.5 million annually by allowing their motor insurance provider to automatically renew their policy.

The FCA introduced changes last April that were aimed at increasing transparency in the insurance sector and bringing motor insurance renewals to the fore. Insurers must now show the previous year’s premium at each renewal so it can be directly compared to the new price. However, data collected by MoneySuperMarket shows that this change has not had the intended effect.

Analysis by the leading price comparison site shows over a third (34.8 per cent) of motorists still allowed their policy to be automatically renewed by their existing insurer at their most recent renewal, with two thirds (66.9 per cent) seeing their premiums rise as a result.

Less than half of Brits (47.6 per cent) noticed that last year’s price was on their renewal letter and, of those that did, nine per cent thought the hassle of changing insurer outweighed the price benefits, although it did encourage 39 per cent to shop around for a better deal.

Loyalty tax

Over half (60.6 per cent) of motorists chose their current insurer because they offered the cheapest deal when they took out the policy. However, for those whose policy was automatically renewed by their insurer, premiums rose by £50 on average. If those customers shopped around at renewal, they could have seen savings of up to £278 each - a staggering £3.6 billion collectively.

Top reasons why motorists auto-renewed rather than change providers:

  • Nearly a fifth (18.76 per cent) were happy with the cost of their insurance
  • A further fifth (18.39 per cent) said it was too much hassle to shop around
  • 15.25 per cent liked the customer service with their current insurer
  • 10.44 per cent said they liked their current insurer’s brand
  • 7.49 per cent said they were loyal to their current insurer
     

Kevin Pratt, consumer affairs expert at MoneySuperMarket, said: “The FCA took a step in the right direction last year by insisting on greater transparency on insurance renewals, but we clearly need to keep banging the drum when it comes to insurance, as in this case loyalty doesn’t pay.

“More often than not, new customers get the best deals at the expense of those that don’t switch. That’s because insurers want to tempt in new business with lower prices, knowing that inertia will enable them to charge existing customers higher premiums to subsidise the process. After a few short years with the same insurer, loyal customers can end up paying hundreds of pounds more than they would if they shopped around for a better deal.

“As a nation, we spend billions more than we need to because so many motor insurance providers renew their customers’ policies automatically and take the opportunity to bump up the premiums – that’s money we can’t afford to waste given the current economic climate. There are savings of up to £278 to be made by shopping around and switching insurers, and it’s a simple task that can be completed in minutes.”

Visit MoneySuperMarket for more information on saving on your car insurance bill.

 

-Ends-
 

1 OnePoll research carried out an online survey of 2,000 UK adults with a valid driving licence from 8 to 12 of February 2018. Results have been weighted to nationally representative criteria.

2 51% of consumers could save up to £278.49. Consumer Intelligence, February 2018

3 According to vehicle licensing statistics from March 2017, there are 37.5 million vehicles registered for us on the road in the UK: https://www.gov.uk/government/statistics/vehicle-licensing-statistics-january-to-march-2017

https://www.moneysupermarket.com/car-insurance/

 

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