Loyalty: Are you being ripped off or rewarded at car insurance renewal time?

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Ben James

Loyalty’s rarely rewarded when it comes to car insurance renewals, leaving a sour taste in the mouths of UK drivers. Learn what to look out for, and how you can ensure you’ll always get the best premium come renewal time.

Renewing your car insurance should be a simple affair. You’ve given your insurer your driving history, you’ve diligently paid your premium and you may well have had a nice chat with their team over the phone. When your renewal date arrives, they’re bound to give you a good quote that’s similar to last year, so you should just let it roll over and automatically renew, right? Wrong.

Unfortunately, that’s not always the case. Just last week, Citizens Advice launched a ‘super complaint’ to the Competition and Markets Authority about price discrimination towards loyal customers.

Does searching for the best price really make much of a difference?

According to BBC Watchdog, around 8 million people each year just let their insurance automatically renew rather than searching around for a better deal. Citizens Advice looked at the rates consumers were charged for essential services and utilities, and found that 8 in 10 people were charged significantly higher prices than new customers when they remained with their existing supplier. Car insurers were found to be among the worst offenders.

One driver affected by an extortionate renewal quote was Alex, 43, who suffers from tetraplegia and uses a car insurer specialising in disabled cover. When renewing his policy, his insurer stated that his premium would rise by 23% to over £1,000. After searching around for a better price, he found an identical policy for just £268. This was later price matched by his existing insurer, demonstrating that they were more than happy to charge him almost £800 over market rate if he’d stayed with them by automatically renewing his policy.

Andrew Bailey, Chief Executive of the Financial Conduct Authority, commented that “Citizens Advice has raised a number of important issues and we will work closely with the Competitions and Market Authority as it investigates this super-complaint”.

The Financial Ombudsman also receives complaints about people’s renewals all the time. Many of these come from the relatives of elderly customers. Often these people have searched for a better renewal price for their loved ones and found one with the exact same insurer at a much lower price. Quite often, many customers end up paying more than they need to for the exact same level of cover, from the same insurer. Don’t believe us? Just take a look at Twitter to read tales of renewal woe from a wave of unhappy car insurance customers.

Is there nothing that stops insurers from doing this?

In April 2017, the Financial Conduct Authority brought in new transparency requirements around insurance renewals. These requirements said that insurers must:

  • Disclose last year’s premium with a customer so that they can easily compare them
  • Encourage consumers to shop around for the best deal
  • Identify people who have renewed 4 or more times, and give them further encouragement to shop around

Unfortunately, many people are still being hit with big increases at renewal, and often these hikes in price are made to look smaller than they actually are.

Just one month after it came into force, car insurers were already breaching new transparency requirements. One customer found that his premium quoted from last year excluded the discounts he was given, meaning that while his renewal price only looked 10% more expensive, it had actually increased by almost 60%.

In April 2018, the Financial Conduct Authority reported that insurance firms were still failing to meet the new rules, almost a year after they were introduced. Jonathan Davidson, Executive Director of Supervision at the FCA commented: “Firms failing to get this right may have led to consumers losing out as they do not have the right information to decide whether or not to shop around.”

With this in mind, the Association of British Insurers have released a set of Guiding Principles and Action Points, which aim to address the big differences between insurance prices for new and existing customers. They’ve said that they will release a report no later than May 2020, which will show how insurers have tried to tackle the issue.

So how do I make sure I’m not getting ripped off at renewal?

There are a few things you can do to avoid being treated unfairly at renewal.

Firstly, make sure you shop around when it’s time for your car insurance renewal. The best way to do this is by heading over to a comparison website like MoneySupermarket or uSwitch.

Second, choose your insurer carefully. If your insurer offers to cut your renewal premium when you call them up, then ask yourself: why didn’t they offer that cheaper price in the first place? Instead they’ve tried to repay your loyalty by charging you more, and they thought they’d get away with it. If they pull this trick, you should think carefully if you want to reward and encourage them by continuing to give them your business.

At By Miles, we’re making a commitment to always offer our renewal customers the exact same price we give to new customers. That means that you won’t find it cheaper by going online or through a comparison website, as it’ll already be our best price.

Also see why are UK drivers paying more for driving less?

We’ll close with a quick word from James, our CEO:

“Unlike many others out there, we don’t treat our customers like mugs. It’s incredibly unfair to take advantage of loyal customers by sneakily hiking the price of their car insurance when they’re auto-renewing. That’s why we offer a best price promise.

We built our own pricing platform, so we only ever give By Miles members the best price at renewal. Whether we’re sending out a renewal quote, giving a quote on our website or on a comparison site, drivers will always see the exact same best price.”

Why not get a quote today and see if you could save with a fairer, more flexible kind of car insurance?