Drivers call for action on car insurance renewals as loyalty penalty increases 22% to £1.2bn a year

Drivers want legal steps to be taken to put the brakes on rip-off car insurance renewal pricing, according to new research out today.                           

According to the GoCompare Car Insurance study, 4.7 million drivers³ were caught out by the auto-renewal trap - where their insurer auto-renews their policy for another year if they haven’t checked for a better deal. 

The practice costs motorists £1.2bn a year in higher premiums – a cost that has risen 22% in just six months.⁴  As a result, drivers are now demanding change with nearly three quarters (73%) wanting more information to help them make a more informed choice at renewal, and 55% wanting the practice of charging existing customers more made illegal. 

On average, drivers have been with the same insurer for 2.6 years, while 13% haven’t changed providers for five years or more. While most companies offer loyalty rewards and discounts in return for continued custom, insurers typically reserve the best deals to attract new business. 

GoCompare’s research found that only 54% of drivers are aware that they’d get a better deal as a new customer than if they renewed a policy. 

While confidence in their ability to change provider prevents 11% of motorists from switching, paying premiums in monthly instalments also creates a huge barrier. 

Monthly direct debit payers are 46% more likely to stay with their existing provider than drivers who pay for their cover in a single sum.  This is particularly concerning because interest is added to monthly premiums so consumers who pay by instalments, and who are often those who need to keep costs down the most, always pay more than those who make a single payment (typically around 12% more)⁵.

Despite regulatory moves to increase transparency in the renewal process, most drivers are missing key information that should be contained in their renewal packs.  Only 17% of drivers recalled seeing a statement in their renewal notice advising them to shop around for cover; just 34% said they saw the warning to check that the cover offered was still appropriate for their need, and only 43% saw the previous year’s premium alongside their renewal premium. 

Most drivers say they want more renewal information. 32% would like more information through the post, 45% via email and nearly a fifth (19%) by text. 

Almost half (47%) think that standard wording in plain English would ensure that renewal letters are consistent and easier to understand, and 40% think that customers should not be penalised for changing their minds after auto-renewing a policy.

Lee Griffin, the CEO and one of the founders of GoCompare, said: “You don’t really expect to hear 73% of people say “I want more information about my insurance policy”, but that is where we have got to now because this is such a big issue, for millions of drivers.  Loyal customers deserve to be given clear information at renewal to help them decide whether to stick or switch. 

“Auto-renewal means that drivers remain legally insured to drive, without having to engage in the renewal process.  But that convenience can come at a very high price.  Those who allow their policy to roll-over for another year can pay hundreds of pounds extra for the privilege.  So, when people realise that they’re being penalised for their loyalty, it’s hardly surprising they want the system to change.

“Despite new rules to improve the information given to people and to encourage greater shopping around, not much has changed.  Awareness of key renewal information remains low and the documentation currently provided by insurers seems to be doing little to engage millions of motorists in the renewal process.” 

Lee Griffin continued: “We have proposed five key changes that could be made now to improve renewals, and millions of drivers agree.  However, until unfair loyalty pricing is tackled, the only way motorists can be confident that their loyalty isn’t being penalised is to take action themselves – to switch and save.”    

GoCompare’s five-point plan to improve insurance renewals

1. Extend the cooling-off period for auto-renewals to 28 days from the current 14 days. Insurers should ensure that customers are aware they have been auto-renewed.
2. Increase communication during the cooling-off period, using a wider range of methods, including email, SMS and push notifications.
3. Cancellation fees should be limited, if not banned completely, for customers who switch away during the 28 days cooling-off period.
4. Action should be taken to ensure firms are much more transparent in their dealings with auto-renewing customers. This should apply at the first instance of auto-renewal, but even more so from year two onwards.
5. The requirement for more transparency should apply to all customer touchpoints – from insurers’ websites to Key Facts, policy wording and other documentation. There should be a standard for transparency and the use of plain English.

For more tips on how to reduce the cost of car insurance:  https://www.gocompare.com/car-insurance/guide/top-tips-for-cheaper-car-insurance/

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For further information please contact:

Anders Nilsson or Louisa Marsden at GoCompare on 01633 654 054 / 01633 655 132

Gordon, Jason or Liz at MAW Communications on 01603 505 845

Keep up-to-date with GoCompare on Twitter; @GoCompare

Notes to editors

¹Between 19 and 20 of February 2020, an online survey of 2,084 randomly selected Great British adults was executed by Maru/Blue. For comparison purposes, a probability sample of this size has an estimated margin of error (which measures sampling variability) of +/- 2.1%. The results have been weighted by age, gender, region and social grade to match the population, according to Census data. This is to ensure the sample is representative of the entire adult population of Great Britain. Discrepancies in or between totals are due to rounding.

²51% of customers could save up to £256 based on independent research by Consumer Intelligence, conducted between 1 October to 31 October 2019.

³Department for Transport’s ‘Vehicle Licensing Statistics: (April 2018)’ there are 38.2m vehicles licenced for use on the roads in Great Britain, 83% of which were cars = 31,500,000. 15% of motorists auto-renewed their car insurance policy at the last renewal without checking prices. 15% of 31,500,000 = 4,725,000.

4.725m x GoCompare’s average shop around saving of £256 = £1,209,600,000 rounded to £1.2bn.

⁴The same research from GoCompare in August 2019 found the auto-renewal loyalty penalty to be £982m, affecting 4.1m drivers at that time.  £982m to £1.2bn in Feb 2019 is a 22% increase.

⁵Comparison of over 50 different insurance policies, comparing the total cost of paying monthly to the cost of the single, annual payment.  On average, paying monthly adds 11.83% to the cost of car insurance.

GoCompare

GoCompare is a comparison website that enables people to compare the costs and features of a wide variety of insurance policies, financial products and energy tariffs.

GoCompare does not charge people to use its services, and it does not accept advertising or sponsored listings, so all product comparisons are unbiased. GoCompare makes its money through fees paid by the providers of products that appear on its various comparison services when a customer buys through the site.

When it launched in 2006, it was the first comparison site to focus on displaying policy details rather than just listing prices, with the aim of helping people to make better-informed decisions when buying their insurance. GoCompare has remained dedicated to helping people choose the most appropriate products rather than just the cheapest, and has teamed up with Defaqto, the independent financial researcher, to integrate additional policy information into a number of its insurance comparison services. This allows people to compare up to an extra 30 features of cover.

GoCompare is the only comparison website to be invited to join the British Insurance Brokers’ Association (BIBA) and is authorised and regulated by the Financial Conduct Authority (FCA).

For more information visit www.gocompare.com and www.gocomparegroup.com