The Great Auto-Renewal Swindle – drivers paying up to £800m too much despite new rules on renewal letters*

11 September 2017

GoCompare warns renewal letters still encourage customer apathy

  • 58% of drivers believe they aren't getting their insurer's best price at renewal
  • Insurers writing to millions of customers to tell them their premium is going up and they don’t need to do anything…
  • Warning comes during new registrations season – the car insurance renewal ‘peak’

Drivers are being charged up to £800m too much on their car insurance renewal, and are told that they needn’t do a thing by insurers rather than being encouraged to shop around, according to the findings of a new study by GoCompare Car Insurance

Renewal habits

The research reveals that, at their last renewal:

  • 15% of drivers allowed their cover to automatically roll-over for another year, without checking whether the price they were offered was competitive,
  • 43% of drivers renewed their insurance with the same provider, but only after checking other quotes,
  • Just 39% switched provider.
  • Based on this, GoCompare estimates that 3 MILLION UK motorists could be overpaying their car insurance by a collective £800m by auto-renewing.

New rules designed to encourage shopping around

While the practice of auto-renewal has gone on for years – causing one insurance boss to recently refer to the market as ‘dysfunctional’ – it has been thrown under a fresh spotlight by new FCA (Financial Conduct Authority) guidelines that require insurers to include last year’s premium in renewal letters.

As a result, insurers are now forced to tell their customers exactly how much they are putting their premiums up by, but they are still ‘reassuring’ them that they don’t need to do anything for their insurance to continue.

While many people are wise to the practice – 58% of drivers say they know insurers save their best prices for new customers – millions are still lulled into bad deals by the convenience of having to do absolutely nothing to remain covered.

GoCompare Car Insurance’s auto-renewal survey found that only around a fifth of motorists (21%) thoroughly read their renewal information; while 21% admitted to skim-reading it.

So why do people auto-renew?

Just over a third of drivers (35%) had auto-renewed because the renewal price offered wasn’t hugely different to last year’s premium.

Other reasons for sticking with the same provider included:

  • Loyalty (21%),
  • A good experience with a claim (9%),
  • And not feeling confident enough to switch because they find car insurance confusing (7%).
  • The main reason cited for switching was an increase in the renewal price (71%).

The reasons given for switching also included:

  • People don't trust insurers to tell them when they are paying too much for cover (37%),
  • A feeling that insurers use underhand tactics to get existing customers to renew with them (17%).

Commenting on the research findings, Georgie Frost, from GoCompare, said: “While auto-renewal guarantees that drivers maintain cover at all times and don’t inadvertently end up driving uninsured, insurers aren’t effectively communicating all the options open to people at renewal.

“We’d like to see insurers make sure that important information is prominently displayed, so that policyholders are actively and effectively encouraged to shop around every year.  At the moment, insurers can – and do – still give more prominence to messages that encourage people to do nothing, despite their premiums going up.”

Top tips from GoCompare to get the best car insurance deals:

  • Give yourself time to review your financial arrangements – diarise your renewal date,
  • NEVER accept your car insurance renewal quote without first checking that the new price you are being offered is competitive – even if your insurer was the cheapest last year,
  • Compare prices AND check the small print.  Make sure you’re making like-for-like comparisons and understand all the charges, any penalties, exclusions and terms and conditions you will be required to meet.

For more information on switching your car insurance visit GoCompare.

- ENDS -

Notes to editors:

*According to the Association of British Insurers, in 2014 there were 20.1m households with motor insurance in the UK.  According to our survey, 15% of motorists auto-renewed their car insurance policy at the last renewal, without checking other quotes therefore; 15% of 20,100,000 motorists = 3,015,000 (3m).  3m drivers x GoCompare’s average shop around saving of £269 = £807,000,000 (presented as £800m)