Lockdown Loyalty Tax: 60% increase in drivers auto-renewing car insurance

GoCompare Car Insurance is reminding drivers of the need to shop around for the best insurance deals as new research reveals a sharp increase in number of policies being automatically renewed in the last 12 months.¹

The research², commissioned by the leading comparison website, found that 7.6m motorists paid a ‘loyalty tax’ to their insurer for allowing their policy to automatically renew, without seeing if they could buy identical cover for less.  Auto-renewal could collectively be costing UK drivers £2.1bn.

Commissioned nearly a year after the UK went into its first National lockdown, the research revealed that the number of automatic renewals had soared by 60%.  Similar research commissioned February 2020 found that 15% of drivers had auto-renewed without first checking other quotes. By this February, the figure had risen to 24%. That equates to 2.9 million more policies being auto-renewed.³

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

Just over a fifth (22%) had stayed loyal because they paid their premiums in monthly instalments and didn’t want the hassle of rearranging their direct debit. This is particularly concerning because interest is added to monthly premiums so, drivers paying by instalments always pay more than those who make a single payment.

Other reasons for sticking with the same provider included loyalty (23%), concern over the hassle and ease of switching (19%), worries over the loss of their no-claims bonus (12%).   

The research also looked at the length of time drivers had been with the same insurer.  On average, drivers have stayed with the same provider for 2.8 years, while 15% hadn’t changed providers for 5 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.  

Only 23% of drivers said they thoroughly read their renewal information.  Less than half (49%) check their renewal premium against what they paid for cover the previous year, 37% go through their renewal papers for any changes to the cover they were being offered, while only 29% considered the level of cover they needed for the year ahead.  

A third of motorists said that renewal communications should be made clearer, with 45% 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% would like more the renewal period extended to give them more opportunity to switch.    

Lee Griffin, CEO and founder of GoCompare, commented, “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.” 

Lee Griffin continued, “The UK spent most of the last 12 months in National or regional lockdowns.  Fewer vehicles on the roads resulted fewer claims, which in turn has led to a drop in premiums.  That said, the biggest savings are only being seen by those who shop around. It only takes a few minutes to compare policies and prices, and most of the information needed to do this is in drivers’ renewal notices.  Just over half of customers using GoCompare could save up to £277, making it time well spent.”⁴

For more information on the options available to consumers facing financial difficulties and whose insurance is coming-up for renewal visit: https://www.gocompare.com/coronavirus-insurance-money/financial-difficulty-your-options/

Tips from GoCompare to get the best car insurance deals for drivers who aren’t receiving help from their current insurer:

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.

-Ends-

For further information please contact:

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

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

Notes to editors

¹Department for Transport’s Vehicle Licensing Statistics for Quarter 4 2020 (published December 2020) report that there were 31.869m cars licenced for use on the roads in Great Britain. 24% of motorists auto-renewed their car insurance policy at the last renewal without checking prices. 24% of 31.869m = 7,648,560.  7,648,560 x GoCompare Car Insurance’s average shop around saving of £277.17 = £2.1bn

²On 8 February 2021, an online survey of 2,042 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.

³Between 19 and 20 of February 2020, an online survey of 2,084 randomly selected Great British adults was executed by Maru/Blue.  15% of drivers allowed their car insurance to auto-renew without looking at other quotes. 24% of 31.869m = 4,780,360.  7,648,560 – 4,780,360 = 2,860,200 additional drivers auto-renewing – a 60% increase.

⁴51% of consumers could achieve a saving of up to £277.17 with GoCompare car insurance based on a comparison of 31 companies.

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.gocogroup.com