The FCA issued a warning last week that several insurance companies, including the RAC, aren’t complying with new rules to point out to people when their insurance company is overcharging them.
“It is simply unacceptable to see that some firms are still not being properly transparent with their customers,” says Jonathan Davidson, FCA executive director of supervision for retail and authorisations.
“We have already acted where we have seen particularly poor practice in firms and will continue to do so.”
Every year, when it is time to renew your car insurance your insurer will send you out an auto-renewal notice.
Under new rules, the notice is meant to show you what your premiums will be this year, compared to what it cost last year. The idea is, when you see that your premiums are on the rise you’ll be motivated to shop around. But, several insurers aren’t bothering to obey the new rules yet.
The FCA found that companies were “mis-stating” the previous year’s premium and leaving out the message to shop around. That's putting it mildly: the renewal quotes system is a complete mess.
I received my own auto-renewal notice last month.
My insurer obeyed the rules and showed me that my insurance premium this year would by £433.75, up £62 from last year despite the fact my circumstances haven’t changed, I’ve made no claims and it is covering the same car. I wasn’t impressed and resolved to shop around for a better deal.
Three weeks later I realised it was almost auto-renewal time and I needed to crack on and look for a better deal.
So, I quickly tapped my details into a comparison website – well as quickly as you can enter all the info that is required, I’ve saved it all on the site for next year to save time.
I was presented with 10 quotes that were all substantially cheaper than my auto-renewal quote.
The top two would cost me £160 less.
Five-minute call saved me £150
It took me five minutes and I was all set to switch. But, it turns out, the only way to cancel my existing policy was with a phone call.
Because car insurance is a legal requirement insurance firms set up auto-renewal and make it an effort to cancel in order to make sure you don’t end up accidently uninsured.
After two minutes on hold, I got through and explained that I was thoroughly unimpressed at the fact my auto renewal quote was 50% more expensive than the quotes I had found online. I was immediately told they would cut my quote as they didn’t want to lose me.
I’ve only been with that insurer for one year but my ‘loyalty’ was mentioned repeatedly. Within three minutes they’d cut my auto-renewal to £287. I didn’t have to make any major changes to my policy – I dropped a named driver who never uses the car – or increase my excess.
I should add I have named drivers on my policy because in the past they have, weirdly, always reduced my premiums.
So, my parents have been named drivers for years despite never driving my car. But, my insurer told me that this time I would save money by dropping them.
The fact my insurer was so quick to cut almost £150 from my quote shows you how inflated auto-renewal quotes can be.
It’s all very well the FCA bringing in rules to show what you paid last year, compared to your auto-renewal quote, but I don’t think that goes far enough.
I think we should stamp out rip-off auto-renewal quotes by forcing insurers to show people what they could pay if they were a new customer, rather than a ‘loyal’ mug.
How much have you saved by shopping around, or haggling with your existing insurer? Tell us in the comments below.