You are using an older browser version. Please use a supported version for the best MSN experience.

Lockdown loyalty tax: A quarter of drivers have auto-renewed car insurance this year paying billions more than needed

This Is Money logo This Is Money 5 days ago Grace Gausden For This Is Money
a person sitting on the seat of a car: MailOnline logo © Provided by This Is Money MailOnline logo

Nearly three million more drivers have let their car insurance auto-renew so far this year compared to the same point in 2020 - a trend which has driven up 60 per cent, new research shows.   

A total of 7.6million motorists have paid a 'loyalty tax' to their insurer so far this year for allowing their policy to automatically renew, without seeing if they could buy identical cover for less, according to data from Go Compare.

This has collectively cost drivers £2.1billion, the comparison website estimates. 

To avoid this, drivers are encouraged to shop around for the best insurance deals, rather than letting their plan auto-renew.

They then have to option to switch to a new company, or use that quote as arsenal to drive down the price of their policy with their existing one. 

Research commissioned in February 2020 found 15 per cent of drivers had auto-renewed without first checking other quotes.

This February, the figure had risen to 24 per cent, equating to 2.9million more policies being auto-renewed so far this year. 

This meant the number of automatic renewals have soared by around 60 per cent. 

As such, those who allow their insurance to auto-renew without checking prices could each be out of pocket by up to £277.

When asked why they allowed their car insurance to automatically renew, 27 per cent thought because their insurer was the cheapest last year, they would be good value this time around too.

Another 22 per cent stayed loyal because they paid their premiums in monthly installments and didn't want the hassle of rearranging their direct debit.

However, interest is usually added to monthly premiums so drivers paying by installments pay more than those who make a single payment.

Some 23 per cent said they stuck with the same provider due to loyalty whilst 19 per cent said they were concerned over the hassle.

Another 19 per cent said they were worried about the ease of switching whilst 12 per cent were concerned about losing their no-claims bonus.


Gallery: Here’s what you could get with your paycheck a century ago (Espresso)

The research found that, on average, drivers have stayed with the same provider for two years and eight months, while 15 per cent hadn't changed providers for five years or more.

Motorists were also asked for their views on the renewal process and the information they received from insurers.

Despite recent changes aimed at making renewal letters more accessible and comprehensive, many drivers find renewal information difficult to understand.

a man sitting in front of a laptop computer: Those who allow their insurance to auto-renew could each be out of pocket by up to £277 © Provided by This Is Money Those who allow their insurance to auto-renew could each be out of pocket by up to £277

Only 23 per cent of drivers said they thoroughly read their renewal information.

Some 49 per cent check their renewal premium against what they paid for cover the previous year, 37 per cent go through their renewal papers for any changes to the cover they were being offered while only 29 per cent considered the level of cover they needed for the year ahead.

A third of motorists said renewal communications should be made clearer, with 45 per cent calling for standard wordings to make renewal letters easier to understand.

A quarter would like to see more reminders to shop around at renewal, while 29 per cent would like more the renewal period extended to give them more opportunity to switch.

Lee Griffin, chief executive of GoCompare, said: 'March, with the release of the first numberplate of the year, is historically one of the busiest months for policy renewals. 

'But our research highlights that millions of motorists are not actively engaging with the renewal process - potentially leaving themselves hundreds of pounds out of pocket.

'After nearly a year of living under Covid-19 restrictions, the economy has taken a battering leaving millions of people on reduced incomes. 

'Insurers are helping those in extreme financial difficulty through deferred payments, and, in these circumstances, it could be in the insured's interest to remain with their current provider.

'However, it's well known that unlike most companies which offer loyalty rewards and discounts for continued custom, insurers typically reserve their best deals to attract new business. So, motorists who are still paying their premiums really need to shop around, especially if they have been with the same provider for a while.' 

How to get the best car insurance deal  

GoCompare has given some tips to drivers to get the best car insurance deals:

1. Never accept your renewal quote without first checking that the price you are offered is competitive, even if your insurer was the cheapest last year.

2. Give yourself time to review your cover – note the renewal date in your diary and shop around at least a week before your policy renews to get the best deal.

3. Compare prices and check the small print. Make sure you make like-for-like comparisons and understand all the charges, any penalties, exclusions and terms and conditions you will be required to meet.

4. Use a comparison website, they provide quick and up-to-date information on a wide range of financial products and services.

AdChoices
AdChoices

More From This is Money

image beaconimage beaconimage beacon