Is cheaper car insurance around the corner?

Motorists could benefit from further cuts to insurance premiums following the publication of a report into the market by the Competition and Markets Authority (CMA).

Pink Car - Nissan Figaro by Reid Per Fiskerstrand under license CC BY-SA 2.0

The CMA wants:

• a ban on agreements between certain price comparison websites and insurers which stop insurers from making their products available more cheaply elsewhere;
• better information for consumers on the costs and benefits of no-claims bonus protection;
• an examination by the  Financial Conduct Authority (FCA) into the sale of 'add-ons' on car insurance policies. It says limited information regarding add-on products such as legal expenses cover makes it difficult for consumers to compare the costs and benefits.

The agreements between certain price comparison websites and insurers - long criticised by MoneySuperMarket - have been deemed anti-competitive because they force insurers to charge the same price via every outlet.

If the insurer declines to enter the agreement, the comparison site in question refuses to sell its policies, reducing its access to market.

Free negotiations

Our view is that each site should be free to negotiate with insurance companies to achieve the lowest possible price for its customers.

Peter Plumb, MoneySuperMarket's chief executive officer, said: "We welcome this move by the CMA, which will help bring car insurance prices down for consumers.

"The removal of clauses from some price comparison website contracts, which prevent insurers from offering a cheaper premium through another price comparison website, is a good thing.

"Unlike some other comparison websites, MoneySuperMarket does not use these clauses in its contracts. We can now work even harder with our motor insurance partners to bring even cheaper premiums to more of our customers."

Post-claims costs

The CMA also looked at the way costs are amassed and paid following an accident.

There is broad concern that costs such as replacement hire car fees for the not-at-fault driver, which are paid by the at-fault driver's insurer, are routinely exaggerated.

The CMA acknowledged 'inefficiencies in the supply chain', stating:

"The amount which at-fault insurers have to pay for temporary replacement cars provided to not-at-fault claimants is significantly more than the cost of providing these services."

These inefficiencies inevitably feed into car insurance premiums.

No remedy

Surprisingly, the CMA has concluded that there is no effective and proportionate remedy to these problems.

It says it investigated several possible options, such as having the not-at-fault driver's insurance cover the cost of the replacement car, or capping the amount which could be recovered from an at-fault insurer.

But it found that "these remedies would require a significant change in the law, which was not warranted since the problem caused an increase in the average premium of only £3 per year."

Switch car insurer to snatch lower premiums

Good news for under-pressure household budgets - average car insurance premiums dropped in January by 6%.

That puts the typical premium at £420 - down from £448 in December. And that's the biggest month-on-month decrease since this time last year.

The numbers come from our analysis of the quotes run on our car insurance channel. We don't know whether the downward trend will continue, though. Prices actually rose during 2014 from their low point in February, when the average price was just £378.

Switch and save

What is clear, though, is that drivers shouldn't expect to secure automatic savings simply by renewing with their current provider.

That's because insurers tend to save their best prices for 'new' customers, not existing ones. So it's crucial to act like a new customer and see who offers the best combination of price and quality when you run a quote - and switch to secure your saving.

There have been big fluctuations in premium prices recently, but January's dip will be welcome relief for those looking for cover, even if it turns out to be a seasonal trend.

Auto-renewing car insurance costs Brits £1.3bn a year

Loyalty does not pay. That's the stark message to emerge from MoneySuperMarket research into automatic car insurance renewals.

We reckon that nearly six million drivers are throwing away at least £113 each by not shopping around for a better deal at renewal. That means UK motorists are wasting £1.3 billion each year by staying loyal and allowing their car insurance to automatically renew, at a price of their insurer's choosing.

We've launched an eight-point auto renewal action plan, challenging the insurance industry to clean up its act when renewing insurance.

Our report reveals that, every year, 23% of drivers - almost six million in total - automatically renew their car insurance with their existing provider when their policy is up for renewal, without checking a single quote from another provider.

Protection problem

And it's not just a financial problem. As well as leaving drivers paying too much, auto-renewal could be locking them into policies that don't provide adequate protection, or are even completely invalid.

The prime benefit of auto-renewal is that it prevents drivers from accidentally becoming uninsured, which is illegal. But our findings raise serious questions over whether auto-renewal is working in the best interests for motorists.

The report reveals that, in most cases, drivers are not asked when taking out a policy online whether they want it to auto-renew after the first year.

Without consent

Instead, by entering credit or debit card details, customers are signed up to make a further payment for year after year, without giving any further consent or approval. There is often no way of opting in or out of auto-renewal when you buy your policy online.

We also found that renewal notices can be unclear and confusing because:

• They often don't include last year's premium, leaving the customer unable to see easily how the costs differ. Some insurers even appear to select which customers they will inform of last year's premium and which ones they'll leave in the dark.
• Changes to the policy, such as removing breakdown cover or rise in the level of excess payable, are hidden in the small print. If customers don't find this information, they could end up under-uninsured or with an invalid policy.
• The language used, including phrases such as 'Happy Anniversary' or 'You do not need to do anything', is designed to coax customers into taking no action, and simply paying the price insurers want them to.

Additionally, the research shows that cancelling an auto-renew policy can be difficult and costly, with some providers charging cancellation fees or obliging customers to use expensive premium rate telephone numbers. Some renewal notices issued online do not then allow cancellation through the same medium

Vulnerable consumers

"in most cases, drivers are not asked when taking out a policy online whether they want it to auto-renew after the first year.."

And it seems that vulnerable sections of society, such as older people, those on low incomes and those that don't have internet access are most likely to be adversely affected by auto-renewal. For example, over 55s are significantly more likely than the younger age groups to auto-renew for numerous consecutive years.

Dan Plant, editor-in-chief at MoneySuperMarket, said: "As our report lays bare, auto-renewal is far from fair, it reduces proper competition and ultimately costs consumers big money.

"Often people have no idea that they're agreeing to auto-renewal when they first buy their insurance policy, and would struggle to opt out even if they did. When renewal time comes around, the letter or email they get from their insurer can be confusing and misleading, and even bury significant changes to their policy. If you don't want to renew your policy, cancelling can also prove difficult.

"This might not matter if auto-renewing didn't cost us, individually and as a nation, so much. With an average saving of at least £113 if someone hasn't switched for a couple of years, most people are better off not letting their insurance policy roll-over automatically. And the over-55s, those with less money, and people not on the internet suffer more than most."As a country, we spend over £1.3 billion more than we need to just because so many car insurance policies renew automatically - that's money many can't afford to waste."

To address the current failings in the auto-renewal process, and to tilt the balance of fairness back towards the consumer, MoneySuperMarket challenges the insurance industry to adopt eight simple best practice recommendations:

1. Consumers should be clearly asked whether they want to opt-in to auto-renewal when first buying their policy;
2. Renewal notices should be in plain English;
3. Last year's policy price should be displayed clearly on your renewal notice, next to the new price;
4. Any significant changes to policies - such as the imposition of a larger excess or removal of breakdown cover - should be clearly displayed on renewal notices;
5. Renewal notices should prominently warn customers they must inform insurers of any changes in their circumstances, such as a new address, change in job, annual mileage or points on their licence;
6. Renewal quotes should clearly include proof of any No Claims Bonus, to enable easy switching to alternative policies;
7. Once a customer has renewed, they must be prominently told about the cooling off period, during which it should be free to cancel;
8. Cancelling auto-renewal should be really simple when a renewal is received, such as a click-through button on emails or a simple cancellation form sent with the letter.

Car insurance premiums are on the up - here's how to save

Now that could be about to change.

Research by MoneySuperMarket reveals that car insurance premiums in March rose year-on-year for the first time in four years. 

The average motorist is now looking at typical annual premiums of £423, which is £24 more than they cost in March last year.

So is this the beginning of a new inflationary trend?

Reversing the trend

Since March 2011, average premiums have fallen by 24%. But the latest year-on-year figure is up 6% compared to last March, when average annual premiums would have set you back £399.

"Hikes in car insurance premiums often happen in March as that's when new registration plates are introduced... "

And premiums aren't just up year-on-year. They've also risen month-on-month, so motorists will have paid on average £7 more in March compared to February.

Why the rise?

Hikes in car insurance premiums often happen in March as that's when new registration plates are introduced.

If you're one of the many people who snapped up a new motor last month, then you'll also have needed car insurance. Extra demand for cover means that insurers can bump up their prices.

It's the same story in autumn, as September is the other month when new registrations are launched.

Premiums reached an annual high of £456 in November last year following the introduction of the new '64' registrations in September.

Competitive pressure

Kevin Pratt, insurance expert at MoneySuperMarket said; "British motorists have benefited from a very competitive insurance market recently, with prices dropping by almost a quarter since March 2011. However, prices can only go so low before insurers have to bring them up again.

"This is no consolation for motorists, though. Driving is expensive enough, without the rising cost of insurance. As prices rise, it's more important than ever that motorists shop around for cover, to ensure their getting the most for their money."

Drive down costs

The good news is that there are plenty of tactics you can deploy to reduce the cost of cover.

Here's our top tips on how to keep premiums to a minimum...

• Never automatically renew your cover Loyalty DOESN'T pay when it comes to car insurance, so always shop around to see if you can find cheaper cover elsewhere. Consumer Intelligence research in November last year shows that 51% of people who shopped around for cover via MoneySuperMarket saved up to £224.18 on their motor premiums.
• DON'T modify your car Any modifications you make to your car will push up the cost of your cover, so think twice before adding those alloys or that new entertainment system. If you do make a change, make sure you tell your insurer, or you risk invalidating your policy.
• Boost securityThe better protected your car is, the lower your premiums will be. Keep your car in a locked garage if you have one, or off-road if you can, and fit an immobiliser and alarm to deter thieves.
• Increase your excess The excess is the part of any insurance claim you pay yourself. The bigger you make it, the lower your premiums will be. A word of warning though - don't make it so big that you can't afford to make a claim.
• Calculate the correct mileageDon't plump for any old figure when putting your mileage down on your insurance form. Try to work out the right number as you'll pay for any extra you put down but don't actually use.
• Add a more experienced driver
  If you're a younger driver, add a more experienced named driver and it should reduce your premiums. NEVER put them down as the main driver - that's as called fronting, and it's illegal.
• Pay annuallyIf you can afford to fork out a lump sum, pay for your insurance upfront rather than monthly. Most insurers charge you interest if you pay every month.
• Get 'black box' cover
  If you're a responsible driver, then black box cover, known as telematics, which bases premiums on your driving behaviour, could be more cost-effective than standard insurance.

Please note: any rates or deals mentioned in this article w

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When Jonathan G. Stein became unhappy with his long-time car insurance carrier earlier this year, the 41-year-old lawyer from Elk Grove, California switched to a new company.

How was he rewarded for his disloyalty after nine years? With savings of about $300 a year and a boost in his under-insured motorist coverage.

Despite discounts for long-term customers, studies show that you can get lower premiums on car insurance by shopping around rather than sticking with one company, and the savings can be significant.

The Texas Office of Public Insurance Counsel did a study showing that a consumer who has stuck with the same auto insurer for eight years could reduce the premium by 19 percent by switching.

"It is disappointing to think your loyalty to a company can hurt you," says Carol Lachnit, features editor for automotive website Edmunds.com.

Even when rewarding loyalty with a percentage off, insurers may use a practice called price optimization that considers a number of factors beyond risk, including what price tag they think you will tolerate.

"They're sort of measuring how likely you are to resist a price increase to your premium," Lachnit says.

Still, many consumers stick it out. Jonathan Stein, for one, has only had three car insurers in his adult life.

"I did get a loyalty discount, but each time I switched, it was because I received better coverage for less money," he says.

Others take a different view.

Linda Carlson has stuck with USAA for more than 10 years because of what she considers exemplary customer service.

The Seattle resident ticked off a series of accidents and other problems over the years, including a crash, and how pleased she was with the way USAA handled them. Her husband has used the company since 1970.

Other customers are simply lulled into staying.

A recent survey by customer satisfaction measurement company J.D. Power and Associates found that even though auto insurance rates increased by 2.1 percent last year and 2.5 percent in 2013, a relatively small percentage of customers switched carriers.

About 39 percent of those surveyed said they did check on other insurers' prices, but just over a quarter of those who price-shopped actually switched.

"You have to look at your own pocketbook and your own budget and decide," Edmunds.com's Lachnit says.

SHOP AROUND

Lachnit says it makes sense to shop around every few years. It is important, though, to keep a list of your coverage in front of you to be sure you are comparing apples to apples.

Also keep in mind that not every insurer offers the same level of service or enjoys the same reputation. It is worth checking on the complaint history of a particular company through your state's insurance commission, she says. A list is available (www.naic.org/state_web_map.htm) through the National Association of Insurance Commissioners.

If someone offers you a better rate and you would rather not switch, Jeanne Salvatore, vice president of the Insurance Information Institute, says it will not hurt to go back to your insurer and let them know about the lower quote. Auto insurance it not the same as a lot of industries that routinely haggle with customers, but there is no harm in trying, she says.

The only consumers who might not benefit from comparison shopping are those with bad driving records because they will have fewer choices, Salvatore says.

She recommends asking for every available discount, whether you are staying or going. These include such things as bundling multiple policies, good driving records, certain vehicle-safety features, paying in a lump sum, being a student with good grades, and belonging to certain membership or affinity groups.

(The author is a Reuters contributor. The opinions expressed are his own)

(Editing by Beth Pinsker and Lisa Von Ahn)