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The Actuary The magazine of the Institute & Faculty of Actuaries

Drivers to overspend by £2.37bn on car insurance premiums

Over eight million UK drivers will collectively overspend by £2.37bn in the next 12 months through automatically renewing their car insurance policy, according to research by MoneySuperMarket.

11% do not check the new cost of their policy ©Shutterstock
11% do not check the new cost of their policy ©Shutterstock

This is despite incoming Financial Conduct Authority (FCA) rules forcing insurers to include previous policy details in renewal letters, highlighting any increase alongside information about the benefits of shopping around.

More than half of UK motorists currently auto-renew with their existing provider, with 41% of those who did so last time, expected to do the same again, regardless of the rule change which takes effect on 1 April.

MoneySuperMarket consumer affairs expert, Kevin Pratt, said: “It’s blindingly obvious that the new FCA rules are not stringent enough to create a switch-and-save culture.

“The majority of drivers chose their insurer because it offered the cheapest deal at the time but, when it comes to renewal, 11% don’t even check the new cost of their policy.

“A huge number of motorists will continue to auto-renew even after the FCA’s ruling comes into effect and pay more than they need to. Until and unless switching becomes a habit, providers will remain unmotivated to offer the most competitive rates to loyal customers.”

The research involved a survey of 2,001 UK adults earlier this month, finding that 33% would not know how much their premium was increasing by without a reminder.

Three in ten said the reason they previously auto-renewed was because they were happy with the cost of their insurance, 20% did it because they had a separate quote matched by their insurer, while 18% said they stuck with their provider because they liked the customer service on offer.

However, Pratt added: “Shopping around is the best way to find the most competitive price and that can mean a difference of up to £275 every year.

“There are massive upward pressures on car insurance premiums. We already know about the 20% increase in insurance premium tax in June, and insurers are also suggesting that reforms to the way personal injury pay-outs are calculated will add a further £50-£70 to annual premiums.

“That makes it more important than ever to be proactive about securing the best deal possible.”

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