You could be overpaying for car insurance by falling for common mistake – don’t do it
MOTORISTS could be overpaying for their car insurance by hundreds of pounds by falling for this common mistake.
A sense of loyalty has meant 2.1 million drivers, equivalent to six per cent of all motorists, have stayed with the same insurer for the past ten years, according to research carried out by price comparison website GoCompare.
But by keeping with the same insurer means drivers could be paying hugely inflated premiums for their motor insurance, even though the financial regulator has stepped in recently with help.
The research by GoCompare revealed that the older generation are less likely to switch their car insurance.
Some 12 per cent of those aged 65 or over said they had been with the same car insurer for more than a decade.
By not switching car insurance firms drivers, collectively, pay an extra £675m every year in needlessly high premiums, according to rival online comparison website Compare the Market.
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According to GoCompare’s research, just over a quarter – 26 per cent – of people kept with the same insurer out of loyalty.
However, almost half – 47 per cent – of those aged 65 or more, said loyalty was the reason they kept with their insurer.
Almost one in five drivers – 19 per cent – simply let their car insurance automatically renew with the same insurer without bothering to shop around.
The people in this group stated they found switching to be a hassle or difficult to do.
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Car insurance expert at GoCompare, Ryan Fulthorpe, said: “Those 2.1m people could be losing out not only on financial savings, but also on improvements to their insurance cover.”
Anyone wanting to get the best deal on their car insurance is advised to shop around.
Until January last year, motorists faced paying much more for their insurance if they did not switch away from their insurer at the end of their 12-month policy.
The so-called insurance “loyalty penalty” arose because insurers would normally offer new customers low prices to lure them to sign up, and would make up the difference by charging their loyal customers more.
This practice though was banned by the Financial Conduct Authority regulator, saying insurers could no longer charge their loyal customers more than new ones.
The move though has removed some of the incentive for drivers to shop around and possibly get a better deal, as they will not face the same sharp price hikes when their policy automatically gets renewed.
However, a driver’s current insurer may not be the cheapest available and motorists are still advised the best policy is to shop around.
Fulthorpe said: “Although the General Insurance Pricing Practices brought in by the Financial Conduct Authority last year are now in place, they only protect the price that a driver would have from the same provider, by ensuring that a renewal price is the same price that a new customer with the same risks would receive.
“By not shopping around drivers aren’t allowing other insurers to assess their risks and offer an insurance policy.”
Elsewhere, due to a postcode lottery, you could be paying four times more for insurance than you neighbours.
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