The great insurance swindle: Motorists hit by £1billion rip-off as firms hide huge rises in premiums
- Millions automatically renew car insurance, unaware of hidden price rises
- Biggest firms are refusing to show them what they paid in previous year
- Drivers can save up to £213 by seeking cheaper deal, Mail research shows
- Consumer groups said insurers had moral responsibility to halt practice
Loyal customers are being fleeced out of more than £1billion a year by car insurers.
Millions automatically renew their policies with the same firm, unaware of hidden price rises.
Britain’s biggest insurers are keeping them in the dark by refusing to show them what they paid in the previous year. Instead, they send letters reassuring customers they have found the best quote for them.
The over-55s are hit hardest as they tend to be the most trusting. In some cases, the children of older customers have come to their rescue after spotting £1,000 bills for car cover (file image)
Consumer groups accused insurers of treating motorists like ‘suckers’ and said they had a moral responsibility to halt the practice.
Drivers can save up to £213 by seeking a cheaper deal, research for the Daily Mail shows.
A fifth of Britain’s 29.6million motorists let their insurer automatically roll over their policy in the last 12 months – meaning they are being fleeced out of as much as £1.3billion.
Add the annual cost of automatically renewing breakdown cover and buildings and contents insurance, and the rip-off could run into hundreds of millions more.
The over-55s are hit hardest as they tend to be the most trusting. In some cases, the children of older customers have come to their rescue after spotting £1,000 bills for car cover.
The Mail and consumer groups have called for previous quotes to be included on renewal letters.
But instead, insurers send letters full of reassuring language such as ‘Happy anniversary!’ and ‘Relax, you don’t need to do a thing’ in an attempt to prevent them going elsewhere for a cheaper deal.
Incredibly, many claim publishing last year’s price would be ‘confusing’ because small administrative changes such as a new address make a comparison meaningless.
James Daley of consumer group Fairer Finance said: ‘The longer you stick with your insurer, the worse it gets. It’s as if you get put on an internal suckers’ list where they start to ratchet prices up. There’s a moral responsibility by insurers not to exploit people.’
There are no official figures showing how insurers hike premiums from one year to the next. The auto renewal system largely affects car and breakdown policies but is also used for home and buildings insurance. What enrages many customers is when they challenge the quote they are often offered a substantial discount to stay loyal to the firm.
The risk of being ripped off has rocketed since 2011, when a law was introduced that forced insurers to automatically renew car cover unless the customer cancelled it. This was designed to curb ballooning payouts to victims of uninsured motorists which were pushing up premiums for all drivers.
A fifth of Britain’s 29.6million motorists let their insurer automatically roll over their policy in the last 12 months – meaning they are being fleeced out of as much as £1.3billion (file image)
Now, up to 35 days before your cover expires, your insurer will write to you and tell you what it will charge you for another 12 months. If drivers lose the letter, forget or don’t realise it’s time to renew, they’ll instantly be covered.
Many renew because the bill was the cheapest they could find 12 months ago – and believe this will be the case for at least another year. With the car insurance industry raking in nearly £10billion in premiums alone, loyal customers who won’t move to a cheaper deal are an easy way for firms to bolster profits.
Industry sources suggest prices offered to such drivers at auto-renewal are typically 10 to 20 per cent higher than for new customers. Research by the GoCompare website found nearly a third of over-55s did not check if they could get a better deal when renewing, compared to 11 per cent of 17 to 34-year-olds.
Mervyn Kohler of Age UK said: ‘Giving customers basic information to help them get a good deal is a building block of fairness.’
Ian Lewis, from Frimley in Surrey, was shocked to find the price at automatic renewal for his wife’s ten-year old Ford Focus had shot up to more than £700 – and he could get the same cover for a third of the cost.
The 65-year-old taxi driver said: ‘I shopped around and obtained the same cover for £244. When the insurance certificate arrived from Saga I had great pleasure in returning it and telling them the price I obtained.’
Of Britain’s biggest insurers, only Axa has started inserting last year’s premium next to the price on renewal letters. A spokesman for Esure said doing so would ‘cause confusion among policy holders’.
The Association of British Insurers said it was working with the City regulator on a fair way to show last year’s price to customers. However, it is likely to be more than a year before any action is taken.
HOW THEY INFLATE YOUR QUOTE
One month before renewal, insurers start crunching numbers about you and your policy.
They check where prices are heading nationally and then look at your individual policy to decide if you’ve become riskier.
For example, a spate of car thefts in your postcode could trigger a premium rise. This can offset factors that should lower premiums such as a drop in the value of a car after a year, or another 12 months of no claims.
The insurer then works out an ‘expected claims cost’ – what it estimates you might end up costing it that year. Finally, it adds in ‘claims inflation’ – the number and cost of claims it’s dealing with – and its own profit to come up with a quote.
- Have you been ripped off over your car insurance renewal? Email us at email@example.com
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