Is it possible to buy very cheap car insurance? Is your policy renewal too expensive? Motor insurance is a very competitive business and there are many cut-price offers available to the average motorist but there are pitfalls that you need to be aware of.
The majority of drivers in the UK pay too much for their insurance because they renew their policies year after year without questioning the almost inevitable price increases. Insurance companies rely upon these regular clients for most of their profits.
However, there is inevitably a wastage of customers as they move their business to other insurers, give up driving or even pass away! This means that the insurance companies have to be continually looking for new business. To attract new clients they have to offer low, competitive prices and a lot of them are prepared to accept little or no profit from new clients in order to get them onto the books. A growing number of motorists switch their business around regularly in order to look for the cheapest or best value policies; but the insurers still need to make a profit. How do they do this?
Whilst there is little profit to be made from a cut-price premium the margin on extras can be considerable. The most common extras are:
If you buy a policy online you will often find that several of these options are included in the policy prices that you are presented with. If you buy a policy over the telephone instead it is almost inevitable that you will be urged to buy some of these as well. Often you will be presented with a cut-price offer which sounds like an excellent bargain at the time. No one will tell you that in 12 months time, when the policy comes up for renewal, you will be expected to pay the full price! The majority of motorists who renew their policies don't notice this and just pay up. The insurers, or brokers, make a good profit which, very often, is more than they make on selling the insurance itself.
How do you protect yourself? If you buy your insurance through a price comparison site, and the quote you choose includes extras, ask yourself whether or not you really need them. If you do, then all well and good. If not just pick up the telephone, ring the insurance company (they usually have plenty of staff available for selling policies!) And tell the salesperson that you want to buy the policy without these extras, and how much discounts can they offer? Very often you will be able to get a sizeable reduction in premium on the spot.
Most people believe that the cost of a premium is fixed. This is incorrect. In fact, if you buy a policy via a company like money supermarket.com or confused.com it is likely that most of the quotations you are offered come from companies which are brokers, and not actual insurers! This means that a commission will be taken by the owners of the website, and the broker, before any money is actually handed over to the insurance company. Both of these will negotiate their own deals with the insurers; so it is quite possible that you could find exactly the same policy issued by the same insurer, from different sources but get a difference quote each time.
Price comparison site are not completely impartial either. The majority will only offer policies from companies that pay them a commission; most of the large sites are owned by insurers as well, so they are not completely independent at all. Also, number of insurers such as Aviva refused to allow their products to be sold on these sites because they believe that too many motorists are being encouraged to buy on price only, and not the service that the insurer offers. A traditional insurance broker may have access to policies which may be more suited to your needs, but which may not be available online.
The moral is: don't just compare prices on a price comparison site; take a little extra time and check several other price comparisons, and perhaps contact a local broker too. You may find a worthwhile saving in this way.
There is a myth that female is no longer get cheaper car insurance the males. It is true that it is illegal for insurance companies to discriminate between the sexes when calculating a premium. However, it is not illegal for them to discriminate against difference occupations! It is no coincidence that female oriented occupations such as nursing, caring, junior school teaching, Human Resources etc usually attract the lowest premiums! In addition, many insurance companies with obviously feminine orientation offer very attractive rates to younger drivers; and how many males will admit to buying their insurance from a company called 'Women Drive Better', 'Girl Drivers'or similar names? Is it bad luck for female welders or scaffolders but good news for the majority of lady drivers.
There are insurers that offer prices which are completely uneconomic for a company offering a normal service. Some of them survive by paring their services to the bone, which means in most cases operating only online, or at the end of premium rate telephone calls; some of them boost their profits by charging excessive fees for services, such as altering their details if you change your address, your car, your job, or any of the long list of changes in personal circumstances that you are obliged to inform them of. We have even seen fees in excess of £100 charged for a simple data entry which took 5 minutes at the most. There entitled to do this because it is written down in their terms and conditions. The vast majority of insurance buyers never bother to read these; it can be a very expensive mistake.
Some motorists, particularly younger ones who pay horrendous premiums, try to buy third-party cover only. This can be a mistake. Whilst 20 years ago third-party or third party fire and theft cover was much cheaper than comprehensive, now it can be a poor bargain, and sometimes even more expensive! This is because insurers have discovered that many people who opt for the cheapest possible level of cover are so short of cash that they may buy cheaper cars (which may be unsafe or contain fewer safety modifications the more modern cars) and they may not maintain them so carefully. Statistically, these motorists are more likely to have an accident or be involved in a claim and their more affluent counterparts! So, if you are looking for a really in expensive policy, by all means get a third-party quote; but get a comprehensive one first. You may be pleasantly surprised by how little you have to pay for the extra benefits that full cover gives you, and you may find that this policy is actually cheaper.
A drawback with price comparison sites is that they are aimed at the average motorist. People who fall outside their criteria usually cannot get cover online. If you have an imported car, one with modifications, or of high-value you will have problems. If you live in a postcode with a high crime rate you may struggle to get insurance at all. If you are in a high risk occupation, such as sports person, entertainer on late night DJ; or If you have too many convictions or claims, you may be turned down automatically; and if you are refused cover by any insurer you are, strictly speaking, obliged to inform any other potential insurer of this fact. In any of these cases you will need to contact a specialist company; often you can make an application online but you will not get a quote immediately; your details will be passed to a broker or a panel of brokers who will then contact you and arranged to look for quotations for you.