Switching the smart way: driving down the cost of your motor insurance 

Alongside inflation, motorists are being hit by price hikes and rising renewal fees on their car or van insurance. 

According to the Association of British Insurers (ABI) the average price of car insurance has increased by 8% in the last quarter of 2022. 

While this partially reflects the rise in inflation and attendant cost pressures across manufacturing industries, it is not entirely based on the cost of fixing or replacing a car. 

According to This Is Money, on top of inflation, many car and van insurers have started charging extra for administrative tasks like renewing or canceling a policy and hiking premiums for drivers perceived to be ‘risky’. 

How is my car insurance calculated? 

The cost of your car insurance premium is supposed to be based on how likely it is that you will make a claim, and how much this would cost them. Insurers will take into account details like age, job, the type of vehicle you own, where it is parked and your claims history or driver’s record, to work out how much risk you pose. 

So if you’ve recently made a claim or had a driving conviction this will certainly push up the price of your insurance. However, it is becoming clear that there are other, less obvious factors at play. For example, did you know that renters are perceived as riskier – and often end up paying up to 11% higher on premiums? 

Insurers may be justifying recent price hikes as related to the rising cost of energy and materials. But experts like The Money Edit have found there are all kinds of “sneaky” fees being added – such as admin fees for changing or canceling your policy. There are also price hikes made that relate to the ‘risks’ posed by your housing status or job.

There are many regulations that exist to protect motorists from extortionate premiums. Recent rules made by the Financial Conduct Authority (FCA) place a ban on insurers from charging new customers more than existing ones. However, these do not cap the level of premium paid by new and existing customers in the form of renewal fees and other additional costs. 

Insurers are taking advantage of this and other loopholes. Today there are more and more policies that include things like set-up or renewal fees. Many also now charge a cancellation fee – which can still be enforced when you cancel a policy within the 14 day cooling off period. Moreover, the fees themselves are higher than ever before. 

How to find the best deal

There are a few obvious ways to reduce your car or van insurance costs. 

The first is building up your no-claims bonus, as well as adding an experienced driver to your policy. The second is to pay annually rather than monthly, which could save you 10% or more according to MoneyWeek.

However, there are some other steps you can take. 

Don’t hang about, shop around

As with almost any financial product, the secret to a cheaper car insurance policy is ensuring that you have looked at other options and switching to the one that will be best for you long-term. 

According to Which?, ‘Letting your car insurance auto-renew could be costing you up to £388 a year. Even if you don’t switch insurers, getting quotes from others could help you save money through haggling.’

So if you know your policy is coming up for renewal don’t wait around – the closer you get to the renewal date the more you will pay. 

The cheapest time to switch is likely to be about a month before your policy’s renewal date. The closer you get to the renewal date after that, the more that car insurers will be able to take advantage of your need to switch and make you pay a higher price. 

Check for sneaky fees

When shopping for motor insurance make sure you look beyond the initial policy price and level of cover, and check what other fees you may be charged. 

Setup and renewal fees are included in the premium. But there may also be other fees related to future changes like adding a driver that aren’t immediately obvious. These other fees will be listed in the insurer’s ‘terms of business’. If you are struggling to find them, it may be easier to ask the insurer for further details directly.  

Compare and create the best profile you can

Even if you don’t end up switching providers, searching comparison sites gives you an opportunity to lower your premium by generating a profile with a lower level of risk. Because each website will have different questions, you can obtain a different risk profile and thus generate a different premium. 

This Is Money found that, despite the ‘risks’ associated with people who rent – who are perceived to be younger than home-owners and thus less experienced drivers, and more likely to be in cities and parked on the street and thus have their vehicles targeted by thieves –  different price comparison websites give different premiums for the same driver.

Leading insurance providers have even suggested that you should reconsider how you describe your job, and avoid associating yourself with a ‘risky’ profession that could increase your premium.

While you cannot lie about what your job is, you can ensure that your job title sounds less risky. For example, going from  “chef” to “caterer” or “journalist” to “writer” may seem insignificant, but these small changes could actually push someone’s premiums down without being fraudulent.

Find out how much you could save and compare quotes for free 

Making sure that you don’t simply renew or accept the first quote that you’re given can make a real difference to the cost of car or van insurance. 

We have partnered with Quotezone.co.uk to help you compare quotes and save time and money while finding the best insurance policy for you.

Car owners can compare quotes with 110+ UK car insurance providers. 

Van owners can compare quotes with 60+ UK van insurance providers

It may be that when the time comes to renew your policy, you could drive down the cost of your insurance, or switch and save yourself a little extra.

If you have any comments, questions, or experiences of switching insurance providers that you’d like to share, we’d love to hear from you. Get in touch with us at support@resolver.co.uk