Meet “Sally” and “Suzy”: These 30-year-old twin sisters are identical in nearly every way. Both women live in Louisville, Kentucky. They’re both employed full time, have stellar driving records, decent credit ratings and no lapses in car insurance coverage. They even drive twin 2005 Honda Civics – same color, make, model and mileage.
Sally pays $2,408 a year for car insurance – to get a policy providing theminimum coverage required by Kentucky – through Farmers Insurance. Meanwhile, Suzy pays Farmers $1,640 for the exact same coverage. So why is Sally paying 47 percent more than Suzy for the same insurance?
According to the Consumer Federation of America, Sally is forced to pony up more cash for insurance because she’s arenter and Suzy is a homeowner.
That’s right. The CFA – which recently conducted an analysis of premium quotes from the major auto insurers for a 30-year-old safe driver in 10 cities across the United States – found that consumers pay an average of 7 percent more (about $112 a year) for auto insurance if they write a rent check rather than a mortgage check for their home.
Depending on the insurer and where drivers live, they could be like Sally — paying upwards of 47 percent more for insurance. For example, Allstate’s auto insurance quote for a renter in Tampa, Florida, was 19 percent more than a homeowner. In Baltimore, Liberty Mutual charged renters 23 percent more.
The CFA maintains that auto insurance companies’ use of homeownership status in pricing leaves low- and moderate-income Americans at an unfair disadvantage. According to Federal Reserve Board data, the median income of renters in the United States was $27,800 in 2013, compared with $63,400 for homeowners.
“To raise people’s auto insurance premium because they can’t afford to buy their homes unfairly discriminates against lower-income drivers,” said CFA Insurance Director J. Robert Hunter in a prepared statement. “A good driver is a good driver whether she rents or owns her home. Insurance companies should not be allowed to target people based on homeownership status.”
The CFA obtained quotes from State Farm, Geico, Allstate, Progressive, Farmers, Liberty Mutual and Nationwide. Geico was the only insurer whose quotes were the same, regardless of the driver’s homeownership status.
“Virtually every state requires drivers to buy insurance, but we shouldn’t force them to buy a home in order to get the best price,” Hunter said. “State insurance commissioners and elected representatives should step in and stop this practice,” he added.
All drivers are legally required to have car insurance, but many people resent what can be a hefty annual expense. The good news, however, is that you can keep costs to a minimum by avoiding some of the most common motor cover traps
Trap 1: Thinking that loyalty pays
Many drivers assume that, if they stick with the same insurer year after year, they’ll be rewarded for their loyalty with lower premiums. On the contrary. Insurers thrive on our apathy and can bump up premiums each year, even when no claim has been made.
The best quotes are usually given to new customers, so the chances are you’ll be offered a more competitive deal if you shop around for cover every year. And even if your existing insurer offers you a lower price than last year, you could probably still save by comparing what else is on offer. So the message is simple: DON’T AUTO-RENEW YOUR CAR INSURANCE!
Trap 2: Buying third party, fire & theft to save money
You might think that, if you buy the minimum level of cover, the premiums will be much lower. But that’s not the case – often you can get comprehensive cover for a similar or even lower price than third party fire & theft cover. And comprehensive car insurance will provide you with much greater protection. Again, shop around.
Trap 3: Paying by monthly instalments
Although paying for your insurance cover upfront can seem more painful financially, it is actually much more cost-effective than spreading the cost by with monthly payments. Insurers usually add steep interest charges to instalments which can dramatically increase the overall cost, so if you can afford to pay the full premium at the outset, you should do so.
One option is to pay your premium in one go using a 0% purchase credit card, where you don’t pay any interest on your spending for up to 18 months. You should aim to clear the debt within 12 months though, so you’re only paying one insurance bill at any one time. It will also mean you avoid a hefty interest rate on the card balance whenever the interest-free period comes to an end.
Trap 4: Assuming all policies are the same
They’re not! Always read the small-print of your car insurance policy as cover can vary widely. Make sure the policy you choose suits your requirements. For example, does yours offer a courtesy car in the event your car needs repairs or is stolen? If not, and you don’t have another vehicle or sources of transport available, you could find yourself stuck. Same applies to breakdown cover.
Trap 5: Ignoring the excess
If a particular motor insurance policy seems unbelievably cheap, always check the excess, which is the portion of any insurance claim you must pay yourself. A very high excess can mean much lower premiums, but also that you might struggle to afford to make a claim at all, which defeats the point of having insurance in the first place.
The excess has two parts – the mandatory and the voluntary elements. The former is set by the insurer, you control the latter.
Trap 6: Overlooking telematics
Younger motorists generally have to pay higher car insurance costs than older drivers, but they may be able to reduce the cost of cover with a telematics policy. Here, ‘black box’ technology monitors the driver’s behaviour and habits and rewards safe and responsible driving with cheaper premiums. But be warned, if you aren’t confident your driving skills are up to scratch, then you’re unlikely to see a reduction in costs. And many telematics policies impose limits of 5,000 or 6,000 miles per annum, rendering them impractical for many drivers.
Trap 7: Not insuring your car because you never drive it
It is a legal offence to keep a vehicle without insurance unless you have notified DVLA that your vehicle is being kept off the road by means of a Statutory Off Road Notice (SORN). You don’t have to be driving to be caught. Even if it never leaves the garage, you either need insurance or you need to file a SORN.
Penalties for transgressing this law include a fixed penalty of £100, your vehicle being clamped, seized and disposed of, and a court prosecution with a maximum fine of £1,000.
Trap 8: Trying to save money by putting a parent as the main driver
Falsely declaring another person is the main driver of the vehicle when they aren’t is illegal. It is known as ‘fronting’ and can not only invalidate your insurance but can lead to a fine and penalty points on your licence, so it should be avoided at all costs. However, you can add a more experienced person as a named driver on your policy to help reduce premiums.
This tactic works for pretty much any driver because the insurer assumes the risk of an accident or theft will be reduced if more than one driver has access to the vehicle.
Trap 9: Making unafforable modifications
Tempting as it may be to fit alloy wheels or the latest stereo system in your car, making modifications can have a major impact on your insurance premiums – simply because the vehicle is no longer its original spec. Speak to your insurer if you are planning on making any changes to find out whether it will bump up the cost of cover.
Trap 10: Assuming all policies cover European driving
Millions of people take their cars abroad each year, but not all insurers include European cover in their policies, which could leave you high and dry if you have an accident while you’re abroad. Check the small print of your policy before leaving British shores and, if in doubt, check with your provider. If your policy doesn’t include European cover, you may be able to add it in return for an extra premium.
Finding yourself with an empty nest can be a shock to the system – once the children have left the house, there are many changes to take on board.
Watching the pennies
Most of us can only dream of running a top marque such as a Porsche, and economy will be a common priority. In fact, many will welcome the opportunity to ditch the hefty running costs associated with a people-carrier or estate in favour of a less fuel-thirsty vehicle.
The Hyundai i20 Hatchback puts fuel efficiency to the fore, squeezing 870 miles out of a tank of diesel in its Blue Drive iteration. And the car is yours for a relatively modest £8,700, or thereabouts.
When it comes to insurance, our couple in their fifties, living in London, would pay around £235 for insurance if they agreed to a £350 excess.
Giving green a go
When you’re nurturing your family, your motoring priorities tend to be having enough room for, first of all, car seats and buggies, and then a few years down the line for the lanky teenagers the babies grow into. Anxieties about environmentally-friendly motoring can often take a back seat (as it were), regardless of our best intentions.
But once the family has flown the nest, you can bring green concerns further up the agenda. If you’re not ready to take the plunge with a fully-electric car, an attractive stepping stone could by the Toyota Yaris Hybrid, which combines an electric motor with a conventional petrol engine.
At £15,495, the Yaris Hybrid is not cheap – it’s essentially just a snazzy hatchback, after all. But it’s exempt from road duty thanks to its CO2 emissions of 79g/km, and you should get around 80 miles per gallon.
Insuring a 3-door version, our couple in their living in a rural location in North Wales would pay a few pounds over £300 with a £310 excess.
Finessing a 4×4
Empty-nesting does not necessarily mean retrenchment to a modest runabout. If your taste favours a hefty 4×4, there are loads of cars out there to suit a broad range of budget and performance preferences.
The Subaru New Forester 2.0DX might be worth investigating if you’ve got £25,000 to play with. It’s not a monster along the lines of offerings from BMW, Porsche or Range Rover, but it’s powerful and easy on the eye. It’ll certainly do the job if you want to sling your golf clubs in the back or take the dogs for an outing in the country.
As far as insurance is concerned, a couple in their fifties with an Edinburgh postcode would pay in the region of £350 with a £300 excess.
Towing a caravan
And that includes the car parked outside – your choice of motor is now no longer restricted by chauffeuring your offspring around (Taxi of Mum & Dad, anyone?) and lugging the family shop back from the supermarket.
With that in mind, here’s a look at five cars that might be more suited to your empty-nester lifestyle than a blubber-boat people carrier.
Living the dream!
If money is no object, you can ditch the family-friendly runabout and upgrade to a luxury marque. Imagine – driving could become a pleasure once more, not an ordeal of arguments about which music to play and whose turn it is to scoop up the detritus from the footwell.
How about a Porsche 911 Carrera Cabriolet convertible? This little beauty will certainly turn heads, but you’ll need a hefty bank balance to get it on the road – this year’s model rocks in on the wrong side of £80,000.
You might assume you’d have to fork out another small fortune for car insurance, but the lowest premiums we found aren’t really that scary, all things considered. A couple in their fifties living in, say, the Cotswolds (with clean licences, full no claims discount and off-road parking) would pay just over £575 for fully comp cover if they carried a £500 excess
According to the Caravan Club, people in their fifties are the UK’s most enthusiastic caravanners – the average age of its members is 55.
Just as important as the caravan itself is the car that will be pulling it, and you might consider an estate to give you the necessary horsepower. The Volkswagen Passat Estate Alltrack is a possibility – it goes beyond mere estate territory towards the muscle and ruggedness of a fully-fledged SUV.
With a towing capacity of 2000kg you should be fine to tow your van, and it’s comforting to know you can still expect impressive fuel economy of around 50mpg.
You’ll need deep pockets for this vehicle, though, with a forecourt price a shade under £30,000. But as a car with a relatively safe risk profile, the insurance should be reasonable. For our couple in their fifties, this time living out-of-town in Cambridgeshire, we found premiums under £200 – although the excess is quite steep at £400. A lower excess would nudge up your annual cost.
If your children have reached the age when they’ve started driving, you’ll know only too well how expensive car insurance for young motorists can be. And, as a parent, your instinct will be to do what you can to help.
A motorist between the ages of 17 and 22 can expect to pay upwards of £1,000 for comprehensive cover, more than double the average price. And some pay much more than that, simply because of the claims figures which show young people are involved in a disproportionately high number of accidents.
But the end result is that many young people simply cannot afford such high premiums. And this has given rise to a practice known as fronting, where a more experienced driver who is not the main driver of a car takes out insurance and adds the youngster onto the policy.
This can save money but it can cause big strife for all concerned. Here’s why…
What is fronting?
Fronting occurs when an older, more experienced driver falsely insures a vehicle in their own name, even though the main driver is a younger, riskier motorist.
Let’s say your son or daughter is heading off to university and is taking the family runabout. A policy in their name is pricey, so you decide to put yourself forward as the main driver, adding your child as an additional named driver. The premium is now more reasonable, so everyone is happy. Or are they?
Fronting is often well meaning and can lead to lower premiums. But the practice is also illegal and could end up costing you dear. And it doesn’t matter if the fronting is deliberate or not. If you are caught out, you could be in big trouble.
Make a claim
The issue usually comes to light if you make a claim on your policy. For example, if your child is involved in an accident, the insurance company would no doubt investigate. It could then discover that your son or daughter is in fact the main driver of the vehicle, even though he or she is named only as an additional driver.
Its suspicions might be aroused if, say, the accident took place in your child’s university city, miles away from your home.
Insurers take a dim view of fronting and can come down hard on both you and your child. The company could, for example, refuse to pay for any damage to your car. If there was anyone else involved in the accident, the firm would be legally obliged to pay out any claim successfully brought by a third party, but it could then pursue you to recover the costs.
Harsh penalties
The insurer could also cancel the policy, leaving the young driver without insurance – and the penalties for driving without insurance can be harsh. An uninsured driver can expect a fine, points on their licence and even a driving ban. They will also pay more for car insurance in the future as previous convictions lead to higher premiums.
In addition, insurers bump up the cost of cover if insurance has ever been refused or cancelled. So, you could be hit with a double whammy.
Criminal record
That’s not all. Fronting is a type of insurance fraud, which means it’s a criminal offence. If you are prosecuted for fraud, you could therefore end up with a criminal record. Of course, no one wants to be branded a criminal, not least because criminals don’t usually find it easy to arrange insurance at any price. They also have difficulty accessing other financial products, including mortgages and credit cards.
Main driver
Fronting, however well intentioned, is clearly a bad idea with serious consequences. But how do you know if you are guilty of fronting? It’s not always clear who is the main driver, especially if several people use the vehicle.
But you should always be down as the main driver if you regularly drive the car to and from work or university, if you drive the car every day, or if you are responsible for the maintenance of the car. The insurance company should ask pertinent questions on your application form. Staff are also trained to look out for potential fronting types. But if you are in any doubt, ask. It can save a whole lot of time, trouble and cash further down the line.
Save money
Talking of saving money, there are other ways to cut the cost of insurance cover for young drivers. Parents can, for example, add themselves as a ‘named’ driver to a child’s policy. This will lower the cost of cover because the insurer will work on the basis that a more experienced driver is behind the wheel for at least part of the time.
Or, you could consider telematics insurance. This is where a GPS-enabled tracker is fitted to the vehicle, allowing the insurer to monitor when, where and how it is driven. The system sounds a bit sinister but can often bring down the cost of cover, especially if the driver demonstrates sensible driving skills and agrees to avoid driving at riskier times
Car and home insurance premiums are at a four-year low, according to new MoneySuperMarket research, which means your next renewal could be cheaper than last time
But it’s still as important as ever to shop around for the best price every year!
Even if your current insurer has trimmed a few pounds off your premium, there could be bigger savings to be had elsewhere – with no need to compromise the quality of protection you enjoy.
That’s because insurers tend to reserve their best prices for new customers as they battle for share of the market. And the simple act of shopping around for our car insurance and home insurance makes you a new customer every time.
What’s happening to prices?
According to 49 million quotes run on MoneySuperMarket between April 2010 and March this year, the average car insurance premium is now £390. When prices peaked in the second quarter of 2011, the average premium was £545, which means there’s been a huge drop of 28%.
Home insurance premiums also sit at a four-year low, averaging at £126 – their lowest since MoneySuperMarket’s analysis began in 2010.
Here’s a look at why prices are falling, and why it’s just as important as it’s ever been to make sure you’re getting the absolute best price on your cover.
Maximise your savings
Clare Francis, editor-in-chief at MoneySuperMarket, said: “It’s the first time since we began monitoring market pricing in 2010 that we’ve seen both car and home insurance premiums fall this steeply across the country. This is great news for households struggling with the high cost of living and could help ease some of the pressure on the purse strings.
“Competition among providers is continuing to drive down the cost of car and home insurance policies and it’s important that consumers take advantage of this. Sticking with your existing insurer is unlikely to net you the best deal.
“Even though your renewal quote might be cheaper than the price you paid last year, chances are you will be able to save even more by switching to a different insurer so it is really important to shop around if you want to maximise the savings available to you.
“Finding the best deal on car and home insurance is quick and easy to do, and consumers stand to pocket up to £220 and £70 respectively* using MoneySuperMarket.”
North of the border
Our analysis has revealed stark regional differences for motorists.
For example, drivers in Carlisle have seen the most benefit, compared to this time last year, as their premiums have fallen by 15%. Motorists in Truro and Galashiels were almost equally fortunate, as their average premiums fell by 14%, year on year.
Car insurance buyers in Perth and Galashiels have the cheapest premiums overall, with annual cover typically costing £231 and £232 respectively.
In fact, Scotland fared well overall, as six of the top 10 cheapest locations for cover are north of the English border.
Cheaper home cover
The entire country benefitted from cheaper home insurance premiums, as costs fell across all 121 postal regions over the past 12 months – according to analysis of more than 11.8 million home insurance quotes run between March 2010 and February this year.
Home insurance premiumsfell by 21%, nationally, while Bolton recorded the steepest drop in average premiums, falling by 19% (£26) over 12 months. Hull and Crewe also did well, benefitting to price drops of 14%.
The average cost of combined buildings and contents cover fell by 19% between 2011 and February this year to £142.
Don’t be wooed
As Clare Francis explains, just because your car or home renewal quotes might be lower this year than last year – it doesn’t mean they’ll be the absolute cheapest prices available to you.
Don’t be wooed by slightly lower prices from your current insurer – instead, take 10 minutes to compare prices using our car insurance and home insurance comparison services, and cut your insurance bills even furthe
MPs are demanding a crackdown on fraudulent whiplash claims to achieve further reductions in car insurance premiums.
According to MoneySuperMarket’s latest analysis of 42.5 million quotations run on the site between January 2011 and June 2014, average car insurance costs have plummeted by almost £100 in the period, from £505 to £406. They recorded a £5 fall from May to June 2014, reversing a brief upward trend that started in February 2014.
People who switch insurer at renewal, rather than those who automatically stick with the same firm, are usually in line for the biggest savings, making it important to shop around at renewal time.
Members of the Parliamentary Transport Select Committee say there would be scope for further reductions if claims costs could be squeezed further. They cite invented and exaggerated whiplash injuries, inducements paid by solicitors to encourage claims, and insurer willingness to settle claims without medical or legal challenge as areas needing urgent attention.
They also want a funding boost for the police Insurance Fraud Enforcement Department, improved sharing of data relating to fraud, and the creation of independent medical panels to determine the likelihood of whiplash injury, which is almost impossible to prove or disprove from a purely medical perspective.
Insurance in the spotlight
Motor insurance and premium prices are now very much a part of the political agenda, having been the subject of Parliamentary debate, a prime ministerial summit and the catalyst for legislative changes, as well as reports from the Office of Fair Trading (OFT) and the Competition Commission.
A recent government report on the ‘dysfunctional’ car insurance market pointed out that whiplash claims add around £90 to the cost of every car insurance premium. According to the Association of British Insurers, fraud is setting the industry back about £2 billion a year. It is estimated that this is adding £50 to the price of every insurance policy.
So will this latest report offer up any new ideas that can be put into practice to bring car insurance costs down even further?
Weeding out false whiplash claims
Although insurers continue to work hard to weed out fraudulent claims, the cost of motor-related personal injury claims is still on the rise, even as the number of crashes on UK roads continue to fall.
The Transport Committee report therefore puts particular emphasis on aspects of the market that have ‘encouraged criminality to take root’ – namely those fraudulent or exaggerated whiplash claims.
To clampdown on the number of fraudulent claims the select committee recommends insurers should be stopped from settling whiplash claims before the claimant has undergone a thorough examination from a genuinely independent medical professional.
Under the current set up, solicitors can commission medical reports on whiplash and other soft tissue injuries from medical experts who could have a vested interest in a positive diagnosis. It’s hoped that setting up independent medical panels will reduce or eliminate false or exaggerated claims and put off any opportunistic claimants who may not fancy trying to convince a panel of their supposed injuries.
The Transport Committee also calling for a ban on solicitors offering incentives, such as up-front cash payments or laptop computers, to encourage motorists to claim after an accident.
It is also deeply suspicious of the growing trend of solicitors seeking medical reports into psychological trauma after even minor collisions – something which suggests that unscrupulous firms are looking for new areas in which to generate illicit revenues.
Spurious claims
Kevin Pratt, insurance expert at MoneySuperMarket, said: “At present, it’s more cost effective for an insurer to pay out a small personal injury claim, no matter how spurious, than try and prove the injury has been exaggerated or even made up completely, primarily because soft-tissue injuries are difficult to prove one way or another.
“The formation of independent medical panels will go some way to addressing the problem. It should be coupled with a system that sees claims for treatment paid directly to physiotherapists or medical staff in settlement of their bills, and not the claimants themselves.”
Pressure from consumer groups and the financial regulator has prompted the Association of British of Insurers (ABI) to commit to making car and home insurance renewal notices clearer and more consistent.
The ABI has written to the Financial Conduct Authority (FCA) proposing an initiative which would force insurers to include in renewal notices how much a customer paid for cover the previous year, therefore showing clearly how the renewal quote compares.
It also wants to include mention of first-year discounts, effectively warning policyholders that the price will be higher at renewal.
The ABI wants the changes to be in place by the end of 2015.
‘Long overdue’
MoneySuperMarket car insurance expert Natasha Glasgow has backed the proposals, but thinks they could be taken further.
Natasha said: “At long last, the insurance industry is waking up to the fact that it has made the process of renewing policies at a competitive price as difficult as possible, with many customers paying way over the odds because they stick with the same insurer year after year.
“Greater transparency is long overdue and we welcome the ABI’s proposals which have resulted from greater scrutiny by the regulator, the Financial Conduct Authority.”
Could go further
But forcing insurers to tell customers how much they paid last year does not go far enough, says Natasha: “Seeing last year’s price on a renewal quote is one step towards getting a good deal – but far from a silver bullet. Car insurance premiums are falling for new customers – as first year deals offer discounts to entice customers in – so comparing across the market will reveal how good a deal your renewal price really is.
“We would like to see these measures go further, and tackle the issue of insurers automatically renewing policies for the second year.
“This practice hinders customer’s abilities to shop around for the best deal. We also hear of some people ending up with two policies running simultaneously, or a policy that no longer offers them the right level of cover.
“Insurers at the very least need to make it much clearer whether customers will have their insurance automatically renewed unless they actively opt out.”
Proof problems
As we found from more than 80 reader comments on our blog Get proof of your no claims discount, proof of no claims is another area which could be clearer.
For example, Don Hanney wrote: “I’ve long been peeved by this insurance-company scam, having lost many years NCD through various companies recognising limited years of claim-free policies. Surely there should be an industry standard.”
Natasha agrees that changes are needed. She said: “Proof of a customer’s No Claims Discount should also be given in the renewal documents. Not having this kind of information readily available can create a real barrier to customers wanting to move to a different insurer because some providers make it very difficult to obtain.”
Motorists could benefit from further cuts to insurance premiums following the publication of a report into the market by the Competition and Markets Authority (CMA).
The CMA wants:
-a ban on agreements between certain price comparison websites and insurers which stop insurers from making their products available more cheaply elsewhere;
-better information for consumers on the costs and benefits of no-claims bonus protection;
-an examination by the Financial Conduct Authority (FCA) into the sale of ‘add-ons’ on car insurance policies. It says limited information regarding add-on products such as legal expenses cover makes it difficult for consumers to compare the costs and benefits.
The agreements between certain price comparison websites and insurers – long criticised by MoneySuperMarket – have been deemed anti-competitive because they force insurers to charge the same price via every outlet.
If the insurer declines to enter the agreement, the comparison site in question refuses to sell its policies, reducing its access to market.
Free negotiations
Our view is that each site should be free to negotiate with insurance companies to achieve the lowest possible price for its customers.
Peter Plumb, MoneySuperMarket’s chief executive officer, said: “We welcome this move by the CMA, which will help bring car insurance prices down for consumers.
“The removal of clauses from some price comparison website contracts, which prevent insurers from offering a cheaper premium through another price comparison website, is a good thing.
“Unlike some other comparison websites, MoneySuperMarket does not use these clauses in its contracts. We can now work even harder with our motor insurance partners to bring even cheaper premiums to more of our customers.”
Post-claims costs
The CMA also looked at the way costs are amassed and paid following an accident.
There is broad concern that costs such as replacement hire car fees for the not-at-fault driver, which are paid by the at-fault driver’s insurer, are routinely exaggerated.
The CMA acknowledged ‘inefficiencies in the supply chain’, stating:
“The amount which at-fault insurers have to pay for temporary replacement cars provided to not-at-fault claimants is significantly more than the cost of providing these services.”
These inefficiencies inevitably feed into car insurance premiums.
No remedy
Surprisingly, the CMA has concluded that there is no effective and proportionate remedy to these problems.
It says it investigated several possible options, such as having the not-at-fault driver’s insurance cover the cost of the replacement car, or capping the amount which could be recovered from an at-fault insurer.
But it found that “these remedies would require a significant change in the law, which was not warranted since the problem caused an increase in the average premium of only £3 per year.”
Good news for under-pressure household budgets – average car insurance premiums dropped in January by 6%.
That puts the typical premium at £420 – down from £448 in December. And that’s the biggest month-on-month decrease since this time last year.
The numbers come from our analysis of the quotes run on our car insurance channel. We don’t know whether the downward trend will continue, though. Prices actually rose during 2014 from their low point in February, when the average price was just £378.
Switch and save
What is clear, though, is that drivers shouldn’t expect to secure automatic savings simply by renewing with their current provider.
That’s because insurers tend to save their best prices for ‘new’ customers, not existing ones. So it’s crucial to act like a new customer and see who offers the best combination of price and quality when you run a quote – and switch to secure your saving.
There have been big fluctuations in premium prices recently, but January’s dip will be welcome relief for those looking for cover, even if it turns out to be a seasonal trend.
Loyalty does not pay. That’s the stark message to emerge from MoneySuperMarket research into automatic car insurance renewals.
We reckon that nearly six million drivers are throwing away at least £113 each by not shopping around for a better deal at renewal. That means UK motorists are wasting £1.3 billion each year by staying loyal and allowing their car insurance to automatically renew, at a price of their insurer’s choosing.
Our report reveals that, every year, 23% of drivers – almost six million in total – automatically renew their car insurance with their existing provider when their policy is up for renewal, without checking a single quote from another provider.
Protection problem
And it’s not just a financial problem. As well as leaving drivers paying too much, auto-renewal could be locking them into policies that don’t provide adequate protection, or are even completely invalid.
The prime benefit of auto-renewal is that it prevents drivers from accidentally becoming uninsured, which is illegal. But our findings raise serious questions over whether auto-renewal is working in the best interests for motorists.
The report reveals that, in most cases, drivers are not asked when taking out a policy online whether they want it to auto-renew after the first year.
Without consent
Instead, by entering credit or debit card details, customers are signed up to make a further payment for year after year, without giving any further consent or approval. There is often no way of opting in or out of auto-renewal when you buy your policy online.
We also found that renewal notices can be unclear and confusing because:
-They often don’t include last year’s premium, leaving the customer unable to see easily how the costs differ. Some insurers even appear to select which customers they will inform of last year’s premium and which ones they’ll leave in the dark.
-Changes to the policy, such as removing breakdown cover or rise in the level of excess payable, are hidden in the small print. If customers don’t find this information, they could end up under-uninsured or with an invalid policy.
-The language used, including phrases such as ‘Happy Anniversary’ or ‘You do not need to do anything’, is designed to coax customers into taking no action, and simply paying the price insurers want them to.
Additionally, the research shows that cancelling an auto-renew policy can be difficult and costly, with some providers charging cancellation fees or obliging customers to use expensive premium rate telephone numbers. Some renewal notices issued online do not then allow cancellation through the same medium.
Vulnerable consumers
And it seems that vulnerable sections of society, such as older people, those on low incomes and those that don’t have internet access are most likely to be adversely affected by auto-renewal. For example, over 55s are significantly more likely than the younger age groups to auto-renew for numerous consecutive years.
in most cases, drivers are not asked when taking out a policy online whether they want it to auto-renew after the first year..
Dan Plant, editor-in-chief at MoneySuperMarket, said: “As our report lays bare, auto-renewal is far from fair, it reduces proper competition and ultimately costs consumers big money.
“Often people have no idea that they’re agreeing to auto-renewal when they first buy their insurance policy, and would struggle to opt out even if they did. When renewal time comes around, the letter or email they get from their insurer can be confusing and misleading, and even bury significant changes to their policy. If you don’t want to renew your policy, cancelling can also prove difficult.
“This might not matter if auto-renewing didn’t cost us, individually and as a nation, so much. With an average saving of at least £113 if someone hasn’t switched for a couple of years, most people are better off not letting their insurance policy roll-over automatically. And the over-55s, those with less money, and people not on the internet suffer more than most.“As a country, we spend over £1.3 billion more than we need to just because so many car insurance policies renew automatically – that’s money many can’t afford to waste.”
To address the current failings in the auto-renewal process, and to tilt the balance of fairness back towards the consumer, MoneySuperMarket challenges the insurance industry to adopt eight simple best practice recommendations:
1. Consumers should be clearly asked whether they want to opt-in to auto-renewal when first buying their policy;
2. Renewal notices should be in plain English;
3. Last year’s policy price should be displayed clearly on your renewal notice, next to the new price;
4. Any significant changes to policies – such as the imposition of a larger excess or removal of breakdown cover – should be clearly displayed on renewal notices;
5. Renewal notices should prominently warn customers they must inform insurers of any changes in their circumstances, such as a new address, change in job, annual mileage or points on their licence;
6. Renewal quotes should clearly include proof of any No Claims Bonus, to enable easy switching to alternative policies;
7. Once a customer has renewed, they must be prominently told about the cooling off period, during which it should be free to cancel;
8. Cancelling auto-renewal should be really simple when a renewal is received, such as a click-through button on emails or a simple cancellation form sent with the letter.
It probably doesn’t feel like it, but we’ve been enjoying lower car insurance premiums in recent years
Now that could be about to change.
Research by MoneySuperMarket reveals that car insurance premiums in March rose year-on-year for the first time in four years.
The average motorist is now looking at typical annual premiums of £423, which is £24 more than they cost in March last year.
So is this the beginning of a new inflationary trend?
Reversing the trend
Since March 2011, average premiums have fallen by 24%. But the latest year-on-year figure is up 6% compared to last March, when average annual premiums would have set you back £399.
Hikes in car insurance premiums often happen in March as that’s when new registration plates are introduced…
And premiums aren’t just up year-on-year. They’ve also risen month-on-month, so motorists will have paid on average £7 more in March compared to February.
Why the rise?
Hikes in car insurance premiums often happen in March as that’s when new registration plates are introduced.
If you’re one of the many people who snapped up a new motor last month, then you’ll also have needed car insurance. Extra demand for cover means that insurers can bump up their prices.
It’s the same story in autumn, as September is the other month when new registrations are launched.
Premiums reached an annual high of £456 in November last year following the introduction of the new ‘64’ registrations in September.
Competitive pressure
Kevin Pratt, insurance expert at MoneySuperMarket said; “British motorists have benefited from a very competitive insurance market recently, with prices dropping by almost a quarter since March 2011. However, prices can only go so low before insurers have to bring them up again.
“This is no consolation for motorists, though. Driving is expensive enough, without the rising cost of insurance. As prices rise, it’s more important than ever that motorists shop around for cover, to ensure their getting the most for their money.”
Drive down costs
The good news is that there are plenty of tactics you can deploy to reduce the cost of cover.
Here’s our top tips on how to keep premiums to a minimum…
Never automatically renew your cover Loyalty DOESN’T pay when it comes to car insurance, so always shop around to see if you can find cheaper cover elsewhere. Consumer Intelligence research in November last year shows that 51% of people who shopped around for cover via MoneySuperMarket saved up to £224.18 on their motor premiums.
DON’T modify your car Any modifications you make to your car will push up the cost of your cover, so think twice before adding those alloys or that new entertainment system. If you do make a change, make sure you tell your insurer, or you risk invalidating your policy.
Boost security The better protected your car is, the lower your premiums will be. Keep your car in a locked garage if you have one, or off-road if you can, and fit an immobiliser and alarm to deter thieves.
Increase your excess The excess is the part of any insurance claim you pay yourself. The bigger you make it, the lower your premiums will be. A word of warning though – don’t make it so big that you can’t afford to make a claim.
Calculate the correct mileage Don’t plump for any old figure when putting your mileage down on your insurance form. Try to work out the right number as you’ll pay for any extra you put down but don’t actually use.
Add a more experienced driver
If you’re a younger driver, add a more experienced named driver and it should reduce your premiums. NEVER put them down as the main driver – that’s as called fronting, and it’s illegal.
Pay annually If you can afford to fork out a lump sum, pay for your insurance upfront rather than monthly. Most insurers charge you interest if you pay every month.
Get ‘black box’ cover
If you’re a responsible driver, then black box cover, known as telematics, which bases premiums on your driving behaviour, could be more cost-effective than standard insurance.
Car insurance insiders are predicting a hike in premiums in 2016. This is why we’ll be paying more – and how you can find yourself something cheaper
One thing moves quickly – the cost
Motorists face an inflation-busting 8% surge in the cost of insurance next year, a report warns.
Accountants EY predict a combination of higher taxes and the cost of claims will drive up premiums in 2016.
The average 8% increase would equate to an extra £30 on the cost of a typical annual policy.
Tony Sault, UK market leader for general insurance at EY “This is the biggest rise in premiums since 2011.
“Insurers are a long way from achieving a repeat of 2013, when the industry turned a profit for the first time in 20 years, so a further hike in premiums comes as no surprise.”
EY believes jacking-up prices will rake in an extra £900million for insurers.
But it also warns that insurers, on the whole, are losing money on the average policy – paying out more in claims than they get from premiums.
They are still able to post profits by drawing on reserves from previous years.
One reason drivers will pay more is a Government-imposed increase in an Insurance Premium Tax, which rose from 6% to 9.5% on November 1.
Insurers have also seen higher claims for whiplash, while cheaper fuel more people are driving, and having accidents.
Kasey Cassells, insurance expert at uSwitch.com, says: “This predicted hike in premiums is another blow to drivers who have already been hit by a rise in insurance premium tax this year.”
Government reforms also promise to lift the upper limit for personal injury suits in small claims courts from £1,000 to £5,000
Claims: Whiplash payouts add cost for all of us
Drivers are in line for a £50 insurance bonus after ministers struck a deal to tackle fake whiplash claims.
Industry bosses are to pass on to hard-pressed motorists all the savings made as a result of measures to tackle crash-for-cash scams, it is revealed today.
The fraud clampdown promises to end the right to cash compensation for minor whiplash injuries and lift the upper limit for personal injury suits in small claims courts from £1,000 to £5,000.
James Dalton, of the Association of British Insurers, said: “The Government reforms are a significant breakthrough in tackling the UK’s compensation culture and are good news for motorists.”
PA
Costly: Running a car in the UK
He said it would “help to bring down unnecessary costs in the motor insurance market and honest motorists should be the beneficiaries”.
Labour MP Graham Stringer, who sits on the Transport Select Committee, said: “We have done a number of inquiries into this and there is no doubt there have been scams between some lawyers, some insurance firms and some criminals that have led to higher premiums.”
The Labour Party/Press Association Images
‘Scams’: Labour MP Stringer sits on Transport Select Committee
The average annual motor insurance premium cost £747 in 2014.
Whiplash payouts cost £2billion a year and add £90 to the average policy. The Ministry of Justice wants to introduce the new anti-fraud measures “as soon as possible”.
AA spokesman Ian Crowder said: “Britain has become the whiplash capital of Europe, so the insurance industry welcomes this.”
Earlier this month, Cardiff crown court heard that a crash-for-cash fraud case had involved 28 separate claims and 57 vehicles, and had cost insurance firms £763,068.
Motor insurance
Average premium in 2014Amount added by whiplash payouts0100200300400500600700800£
Justice Minister Lord Faulks said: “Insurers back these much-needed reforms and have committed to handing over savings to motorists quickly.”
But George Osborne has already added to drivers’ insurance costs.
He raised insurance premium tax from 6% to 9.5% in July’s emergency Budget.
The accident wasn’t his fault, but this Kent motorist would have been on the line for an astonishing £750 increase in his car insurance if he hadn’t seen a TV show
How even cheap technology can save you hundreds
Linden Ellis was minding his own business when a van cut across him in Maidstone town centre. A common enough occurrence, but this time the van clipped his car.
Linden’s Vauxhall Vectra was was damaged as a result, and the van driver denied responsibility. The consequences? Linden was about to lose two years worth of no-claims bonus.
“This may have only been a fairly minor accident, but losing your no claims bonus unjustly can have a huge and unfair effect on premiums,” said Gerry Bucke, general manager of Adrian Flux Insurance Services.
How big an effect? Linden’s premiums were set to rise £750.
How £16 saved him a small fortune
Fortunately for him, Linden saw a TV programme last year that featured dashcams.
And even if you don’t get a discount, pretty much all insurers now accept footage from them, meaning if you’re in an accident that’s not your fault you have a better chance of proving it.
Which is exactly what happened to Linden.
“He said it was not his fault, and without the video evidence it was his word against mine so it would have been almost impossible to prove,” he said.
“The camera has been a godsend … It’s saved me hundreds of pounds.”
Other ways to bring down your insurance costs
Dashcams aren’t the only technology that can save you serious money on your insurance.
Telematics can also bring down your premiums. This is a GPS box that monitors how, where and when you drive, and can send alerts out for bad or dangerous driving. Co-operative Insurance estimates adding a telematics box to your car saves young drivers £170 a year on their insurance.
There are also a string of ways to save when you renew whether you have any extra tech or not.
Oh, and while you are comparing, there are some tricks to getting cheaper insurance without reducing your cover level, we’ve rounded up 6 of the best here.
If you can keep your car in a garage or off the road the premium falls again.
Oh, and once you know where’s cheapest, check to see if there’s cashback available. By using a cashback service like TopCashback or Quidco rather than using the comparison site directly you could get up to £120 back.
More than a quarter of us are set to struggle as those post-Christmas credit card bills start pouring in – but you can make life easier as you pay it all back
Back in the black: You’ll love it when you’ve fixed those finances
It’s the New Year hangover that just won’t go away. And as the post-Christmas credit card bills and bank statements start hitting the mat, it just gets worse.
But if you’re suffering at the moment, the one comfort is you’re not alone. More than a quarter of us are set to struggle this month as the expense of the festive season takes its toll.
Research from the Money Advice Service shows one in three people felt pressure to spend more than they could afford over Christmas.
And more than 13 million workers were paid early in December and will have to wait longer until payday this month
On top of this, households are already feeling the pinch as bills keeps rising.
Control the cash: We’ve got some tips on slashing your spending
The latest BACS Bill Tracker from the people behind direct debits shows the cost of essentials including energy , mortgages and rent were up £85 in November compared to five years ago, to an average of £671 a month.
So to help you through this tough month and the year ahead, we’ve come up with 10 great ways to slash your spending and put more cash in your pocket.
We’ve got some easy money-saving ideas that will leave you hundreds of pounds better off in 2016.
Ditch the dud direct debits
Cancel those payments you don’t need, no matter how little they cost. Maybe you’re no longer getting value from your gym membership, dental plan, magazine subscriptions, club memberships and other non-essential payments that eat away at your income.
Remember: If you don’t use it, lose it. Every penny saved is a boost to your budget.
Cut your credit card interest costs
If you’ve got £2,000 spread across cards at an average interest rate of 19% APR, and are paying back 5% of the balance each month, it will take you almost nine years to clear the outstanding amount and cost you more than £835 in interest.
You’d be debt free in just over a year and a half simply by switching it to a 0% balance transfer card and paying off £100 per month – and all it would have cost you is the one-off balance transfer fee of less than £60.
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Take charge: Switch to a 0% balance transfer card
Consolidate debts
If you find it difficult to keep track of your credit card balances, your overdraft or repayments on store cards or car finance, maybe it’s time to consider combining all your borrowing into a single personal loan.
If you do this, you must destroy the cards and close accounts completely once you have paid off balances. The last thing you want is to have restructured your debt and then get back into bad habits by running up new debts on your plastic.
Repay that overdraft
If you’re constantly in the red , it’s time to clear the debt once and for all. If you’re £500 overdrawn for at least three weeks of every month, you could end up paying £20 per month in charges with some banks. That’s a hefty £240 over a year.
If you opt for the Everyday Plus credit card from MBNA, you can transfer some of your credit limit into your bank account to wipe out your overdraft.
With the interest rate at just 7.4% APR, if you pay £22.50 per month to the card instead of in overdraft charges, you’ll have wiped out your overdraft in just two years. The total interest would be just £39.
The cheapest banks for overdrafts are First Direct (first £250 interest free) and M&S Bank (first £100 interest free).
Plan: Get rid of your overdraft
Compare insurance quotes
The golden rule is to NEVER accept the renewal quote from your home or car insurance provider and to shop around every year to see if you can get the same cover cheaper.
It’s worth a call to your insurer as sometimes they will price match and save you the hassle of changing providers. We managed to find car insurance cover for £155 viagocompare.com instead of the £220 renewal quoted.
De-clutter
It can be a struggle to find a home for your new Christmas gifts , so why not have a clearout of all the stuff you no longer use and stick it on eBay or sell it locally on gumtree.
It’s a double winner as your house will be less cluttered and your bank account will look a bit healthier.
Clear the clutter: Sell your unwanted stuff
Homemade instead of shop bought
Carry a notebook with you for two weeks and write down everything you spend. You’ll be surprised how much cash you fritter away on coffees, sandwiches and that beer after work.
You can easily save upwards of £30 per month simply by making your own packed lunch a couple of days each week rather than shelling out for expensive shop-bought sandwiches.
If you’re a smoker and know you can’t give up altogether, try cutting back to two ciggies a day. In a year that will save you £250 – enough to pay the TV licence and have a bit left over.
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Plan ahead: Careful food shopping will save you cash
Smart food shopping
Rule 1: Don’t impulse buy at the corner shop. Instead, plan your food shopping and go to the supermarket just once each week.
Rule 2: For this to work you need to stick to your list and not be tempted by special deals that’ll end up sitting at the back of your cupboard for weeks. Don’t let sneaky supermarket marketing ploys ruin your cost saving plans.
Rule 3: Use the food you’ve got in the freezer. Lots of people use it as a store cupboard and end up forgetting what they’ve got buried away in there. In a recent trial, Mirror readers saved from £15 to £30 a week by doing this – and they didn’t end up throwing half as much food in the bin.
Fill up the car for less
Check out petrolprices.com to find the cheapest petrol garage near you. Even though fuel costs are falling fast, it still helps if you can save an extra 2p or 3p per litre.
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Shop around: Look online for the cheapest petrol station
Be more energy-efficient
Help keep those bills down. Don’t leave lights on in unused rooms or appliances on standby. This could save you £50 to £90 a year.
Try turning your thermostat down a notch or two. Every degree you lower the temperature can help save £50 or more per year.
If your heating is on a timer, then set it to come on 10 minutes later and go off 10 minutes earlier – that way you’ll save 30 hours of energy costs in three months.
Consider buying a radiator booster. For a cost of less than £30, it drives extra heat into your room and could help you shave up to 5% off your annual energy bill.
Many firms assure people they have found the best price for them or bury rises in small print – and give little or no explanation.
Millions fail to challenge quotes but the Sunday People found customers could save up to £266 a year on car and home cover by shopping around.
Dan Plant of moneysupermarket.com said: “Auto-renewal reduces competition and ultimately costs consumers big money.”
Mother-of-three Vickie Dunn was stunned when Tesco said her car insurancewas going up £200 – then furious when she saw the same policy being offered to new customers online for £183 less.
Shock: Vickie Dunn couldn’t believe it when Tesco added £200 to her car insurance bill
“I was gobsmacked,” she said. “I expect a discount for being loyal, not a fight to get the same price offered to everybody else.”
Experts say prices offered to existing customers are typically 10 to 20 per cent higher than those for new clients.
Our research – done alongside gocompare.com – found nearly one in five of the UK’s 32 million drivers renews their cover automatically. This means motorists could be being ripped off by as much as £1.2bn a year.
And adding on home, travel, breakdown and pet insurance would add hundreds of millions.
Gocompare calculates 5.8 million drivers are being overcharged an average £208 and some 4.25 million home policy customers pay £58 over the odds.
Shop around: Gordon Polding saved £150 by switching home insurance
Gordon Polding saved £156 on home insurance after M&S said his premium would be £240 and he found a deal with the AA for £84.
The 63-year-old, from Coventry, said: “I got a quote on gocompare and asked if they’d match it. I’d been with them years but they wouldn’t budge. It clearly does pay to shop around. They take the mickey.”
Regulators say customers should be able to see the previous year’s cost when they get renewal documents. But the proposed changes, open to consultation until March, will not come into force until next year at the earliest.
Of Britain’s biggest firms, only Axa puts last year’s premium next to the price on renewal letters. Many claim publishing the previous price would be confusing.
The Association of British Insurers says it is working with the Financial Conduct Authority on a fair way to show the previous year’s price to customers.
An average comprehensive annual policy cost £625.70 in the final quarter of 2015 – up by £105.64 or 20% compared with the last three months of 2014
The typical cost of car insurance cover has leapt by more than £100 in the space of a year, an index has found.
An average comprehensive annual policy for someone who shops around across the market cost £625.70 in the final quarter of 2015 – up by £105.64 or 20% compared with the last three months of 2014 – according to the AA’s British Insurance Premium Index.
The typical cost of comprehensive cover increased by £59 or 10% compared with the third quarter of 2015, the AA said.
The 10% quarterly jump is the biggest seen since 2010, it said.
The AA said the rising cost of motor insurance is partly due to a tax hike imposed in November 2015.
More expensive: The cost of car insurance has rocketed by £100 in just one year
The standard rate of Insurance Premium Tax (IPT) – the tax paid each time an insurance policy is purchased in the UK – increased from 6% to 9.5% from November 1 2015, as announced in the summer Budget.
The change affects 7.3 million car policies.
Michael Lloyd, director of AA Insurance, said that personal injury claims – particularly those for whiplash – are also continuing to “haunt” the industry.
It is estimated that false and exaggerated claims add around £50 to every policy.
Research by AA Insurance last year suggested that 11% of drivers thought it was acceptable to make an insurance claim for an injury following a collision, even if no injury was suffered.
Mr Lloyd said: “It’s this acceptance that it’s OK to defraud insurers that has become endemic.
“It is stealing and it affects the premiums paid by your friends, your family and your colleagues – those that most wouldn’t dream of defrauding.”
Mr Lloyd said he expects premiums to continue to rise though 2016 “but not at the exceptional rate recorded over the last quarter of 2015”.
He continued: “And the sooner new legislation to tackle whiplash claims becomes enshrined in law, the sooner that will be reflected in the premiums quoted for car insurance.”
For the first time we can see not only how many people get told “no” when they claim on their insurance, but why they’ve been rejected too. This is how to ensure you DO get paid
Hundreds of thousands of people have been told “no” despite having insurance in place – this is why
Consumers have been denied more than a billion pounds in insurance payouts, new figures reveal.
In 2013 and 2014 some 525,000 people claimed on their home, car and travel insurance, only to be told “no” by their providers.
In that period, it was home insurance that was rejected the most often – with 378,000 claims denied. Travel insurance claims were denied 104,000 times while car insurance claims were denied 43,000 times.
“As insurers, we want our customers to have greater trust in us to pay claims when life gets difficult. We cannot earn that trust without being more transparent about how many claims are paid and why a minority of claims are usually declined,” said Huw Evans, the director general of the Association of British Insurers.
Average insurance payouts
£2,160
Car insurance
£2,520
Home insurance
£884
Travel insurance
Source: ABI, data from 2013-2014
Why insurers say “no”
The ABI didn’t just tell us how many people’s claims were rejected, it also explained why.
Home insurance claims were turned down most often because they didn’t think customers were looking after their home properly. Or “wear and tear or damage caused by a lack of maintenance”.
Claims were also rejected for being below the minimum threshold to pay out and not having accidental damage cover in the first place (it’s an optional extra).
“The burden of keeping a home in good knick lies solely with the policy holder and not doing it can have devastating ramifications if the worst happens. If maintenance work is done on the home, you must then inform your insurer of the changes made as that could provide insurers a reason to reject your claim,” said Simon McCulloch, head of insurance at comparethemarket.com
In the case of travel insurance, claims were most often rejected because trips were cancelled too late, people not being able to prove something was lost, not telling insurers about pre-existing medical conditions and – again – because claims were too small to trigger the insurance.
Number of insurance claims
4.3m
Car insurance
1.8m
Home insurance
800,000
Travel insurance
Source: ABI, data from 2013-2014
With car insurance, the picture is better. Some 99% of the 4.3 million claims made in that period were paid out on.
When claims were rejected AXA – which also published its own claims figures – found the most common reasons for a claim being rejected were for people not locking their cars, people driving under the influence of alcohol or booze or when cars were lent to someone else.
“Although the vast majority of claims are paid, there is still work to be done in making it absolutely clear to our customers, not just what their policy covers, but also what it does not cover and we will continue to look for new ways to do that,” said AXA UK chief executive Paul Evans.
When it comes to maintaining your home to stop insurers rejecting your payout, AXA offers the following tips:
Make sure your property is in a good state of repair and that any necessary maintenance work is carried out as required.
Slipped roof tiles and loose cement around chimneys can lead to water damage when the weather turns bad. Fixing these in advance would avoid you needing to make a claim in the first place.
Flat felt roofs have a relatively short lifespan. Typically, we would not pay for repairs if water is leaking through as a result of its age or condition.
Make sure you regularly clear your guttering. This will help ensure that rainwater does not enter your home and cause damp or water damage.
If your home has damage to its rendering, or its pointing is in a poor condition, get this repaired as soon as possible. This could leave you vulnerable to water and storm damage, and you may not be covered if you claim.
The Association of British Insurers (ABI) has published payout rates for the most common insurance claims made during 2013 and 2014
Home insurance: More likely to be turned down than car insurance claims
Around one in every five home insurance claims made by consumers is turned down – while just one in every 100 motor insurance claims is unsuccessful, new industry figures reveal.
The Association of British Insurers (ABI) has published payout rates for the most common insurance claims made during 2013 and 2014, in moves to help improve transparency and build customer trust.
Around four in five (79%) policyholders who made a claim under their home insurance were successful and received a payout, with the average figure being £2,520.
Meanwhile, nearly nine in 10 (87%) of travel insurance claims were paid out, with the average payout put at £884.
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Problems: Insurers are much less likely to pay out
The analysis covers 6.9 million claims handled by 19 insurers.
It marks the first time the ABI has released data in this way, showing the success rates when customers have made a claim under motor, home and travel insurance – the three most popular types of general insurance held by UK households.
The figures were compiled to help customers understand more about what they are covered for – and why a claim might be turned down.
Common reasons for home insurance claims failing include claims being made for normal wear and tear or for damage caused by a lack of maintenance which was not insurable; the value of the claim being less than the policy excess; or that the customer had not bought the right kind of cover, the ABI said.
An example of not having the right kind of cover would be someone not having accidental damage cover, which is often an added extra.
With travel insurance , claims were often turned down because the policyholder had a lack of evidence to back up claims for items which had been lost, or because they failed to tell their insurer about a pre-existing medical condition.
Travel insurance: Claims are often turned down because of a lack of evidence
In other cases, the travel insurance claim came to less than the policy excess or a claim was made for a holiday cancellation which fell out of the scope of the cover.
Explaining the particularly high success rate for motor insurance claims, a spokesman for the ABI said that motor insurance products tend to be quite similar in what they cover, whereas with home insurance, for example, people could be covered for a wide variety of events.
There is also a diverse range of “add ons” such as legal expenses cover or emergency assistance for a boiler breaking down which can be bought with home insurance.
Huw Evans, ABI’s director general, said: “As insurers, we want our customers to have greater trust in us to pay claims when life gets difficult.
“We cannot earn that trust without being more transparent about how many claims are paid and why a minority of claims are usually declined.”
He continued: “Contrary to popular belief, insurers want to pay honest claims.
“It helps nobody when customers have bought the wrong product or have not disclosed important information.”
Mr Evans said the figures will be used to drive consumer awareness and further improve the acceptance rates for home and travel insurance claims.
