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The Actuary The magazine of the Institute & Faculty of Actuaries

Drivers waste £1.5bn per year auto-renewing car insurance

UK motorists are collectively wasting an estimated £1.5bn each year by allowing their car insurance to automatically renew without checking if they are getting a good deal, according to research by Gocompare.com.

"Loyalty, when it comes to car insurance, generally doesn’t pay" ©Shutterstock
"Loyalty, when it comes to car insurance, generally doesn't pay" ©Shutterstock

It shows that 5.25 million people fall into the auto-renewal trap annually, with drivers aged between 18 and 24 the most apathetic, despite potentially having the most to gain.

It was also found that 41% do this out of loyalty to their insurer, with 32% of drivers saying that they have been with their current provider for three years or more, while 22% have done so for at least four.

Gocompare.com relationship manager, Matt Oliver, said: “With car premiums hitting record highs, it’s now more important than ever to make sure you’re not getting a raw deal.

“At renewal, insurers will offer to continue your cover without you having to lift a finger. What they’re not so good at telling you is that by shopping around you may be able to find the same cover for less.

“Loyalty, when it comes to car insurance, generally doesn’t pay, the best deals nearly always go to new customers.”

The research involved surveying 2,000 randomly selected British adults earlier this month, with 29% of respondents saying that they do not search for better deals when renewing their car insurance because they find it confusing and don’t have the confidence to switch.

In addition, only 29% said they read renewal information thoroughly, a third believe it should be easier to understand, and 34% do not trust insurers who tell them they are paying too much for cover.

Oliver continued: “Luckily, fighting back is simple. Use your renewal letter as a prompt to take action. As soon as it arrives, read it and compare the price and cover you are being offered against last year’s documents and challenge yourself to beat what you’re being offered.

“Consider any changes you might need to make, and look at similar policies on a comparison site to see if you can make any savings.

“If you decide to switch you’ll need to tell your current provider. Most car insurance policies automatically renew unless you notify the insurer to the contrary, if you don’t stop the auto-renewal you could be faced with a hefty cancellation charge.”