Millions lose out when renewing their car insurance

Thu, 04 Aug 2005

The month of August is a busy month for insurance companies as millions of drivers in the UK renew their car insurance policies. Those who make an effort can save over £50 and it should take less than an hour to achieve.

The reason August is busy for car insurance is because it used to be the time when new car registrations were issued on the first of August each year. Although the system changed in in 2001, many drivers are in the old cycle. The current system is car registrations are released twice a year, in March and September.

Many insurers are seeing an annual increase in the number of appications, one such company is Privilege Insurance. August figures have shown an increase in the first week for website hits and phone calls, this was double than that for last August. Many people tend to look at the price only as their gague for a good deal. Sometimes paying a bit more or having a policy with a higher excess may offer more value for money in the long term. Also by paying less do you still get adequate cover for example, hire car, courtesy car, old for new.

What was a cheap policy last year may not necessarily be a good deal the following year. Insurers offer good deals for the first year then increase the cost of premiums the following year. Companies rely on motorists' not changing to another company to make up for the initial cheap deal. Premiums can increase for a number of reasons, they can be due to a change in the motorists status, such as no claims bonuses, that are accumulated or lost. "Shopping around for car insurance can seem like a chore, particularly during the summer, but customers should use it as an opportunity to challenge their existing insurer by comparing their renewal quote with the competition," said Ian Parker, managing director of Privilege Insurance.

Some people don't know how much shopping around should be done. The UK's largest branch-based insurance broker, Swinton, say motorists should get at least seven quotes from which they are likely to find a good deal.

Their findings show that motorists who get only one insurance quote pay on average £508.33 a year, but those who get quotes pay an average of £456.07, a saving of £52.07. Swinton also found that motorists just stay with their current insurer and only seven in ten motorists bother getting three or less quotes. By tailoring the deal properly, the motorist could save more than £100. While moving from a middle of the road policy to a better value deal can save £52 Sainsbury's Bank found that by switching to a more competitive insurance, motorists could save an average of £108.55 a year.

"The car insurance industry is very competitive, which is good news for motorists as they can save a lot of money by shopping around," commented Joanne Mallon, Sainsbury's Bank car insurance manager.

Advertisers create marketing campaigns that entice the public as offering the best deals. Friends will tell you that they have secured the best deal. However there is no insurer that is best value across the board.

Richard Mason, director of price comparison website insuresupermarket.com, explained: "We firmly maintain that no matter what the marketing literature tells you or how much research has been carried out, no one insurer can ever be the cheapest for every single person or every scenario - or even a majority of scenarios - so it is always, always, always worth shopping around to compare the whole market.

"And when it is so easy to do this on the internet it seems madness to accept the insurer at its word rather than going to find out for yourself."

According to the Nationwide Building Society, as many as one car in five on the roads in the UK is inadequately insured. One reason is that drivers do not disclose to insurers what modifications have been made on their cars. Most of these drivers said they were unaware of the fact they had to.

The consequences of failing to register changes are your insurance policy may be invalidated. Minor changes however, such as alloy wheels or tinted windows do not have to be registered. Stuart Bernau, Nationwide's executive director, commented: "Many people spend a considerable amount of time, hard work and money modifying theirs to make it more unique. If any damage is caused to it, they are likely to want it dealt with quickly and efficiently, to restore it back to its best. It makes sense, therefore, to make sure ... any changes you have made are fully covered."

Remember, by lying on car insurance forms, can be a "false economy". It is thought that one in ten motorists lie on their car insurance applications to keep costs down. Lies range from pretending the car is kept in a locked up garage overnight to deliberately underestimating the value or power and performance of a car.

But RAC Financial Services spokesman Philip Hale points out that lies are potentially very expensive.

"Many insurance policies will be invalid if the details given don't match the vehicle and minimal cover just means you're more likely to have to pay for repairs, or damage you cause."

Drivers used to have a period of 14 days between their current insurance policy expiring and when the had to have the new one in place by. But this period of grace has been abolished to fall in line with European regulations. So motorists can't rely on the 14 days, the insurance must be effective immediately, says the British Insurance Brokers' Association (BIBA).

BIBA advises drivers to know when their renewal date and to ensure they have new cover in place for that date prior to it running out or risk being prosecuted.

"Insurers have in the past offered a 14 day Road Traffic Act (RTA) Certificate which was evidence of Insurance pending receipt of their renewal certificate, but even this did not offer free cover," said Graeme Trudgill, British Insurance Brokers' Association technical services manager.

"The British Insurance Brokers' Association wants to put the record straight and ensure that all motorists know that there is no longer any room for manoeuvre and that insurance must always be up to date."

"We would urge policyholders to renew their policies at least 14 days in advance of the renewal date so they are in possession of their motor insurance certificate in plenty of time."
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