24th February 2015
UK motorists are wasting £1.3 billion each year by allowing their car insurance to automatically renew, at the price set by their insurer.
Failing to shop around for a better deal at renewal time means every driver could be throwing away at least £113, a new report from MoneySuperMarket.com has found.
The report reveals that almost six million drivers (23%) automatically renewed their car insurance with their existing provider without looking for a single alternative quote when their policy last expired.
Nearly one-third (29%) of those who auto renewed last time their policy came to an end had not changed providers in five years, or more. Serial auto-renewing is significantly more likely among those over 55, as two fifths (40%) have not changed provider in five or more years.
The practice of auto-renewal may not only be leaving drivers paying too much but also locking them into policies that don’t provide adequate protection, or are even completely invalid.
Although, auto-renewal can be a benefit to drivers as it ensures that they don’t end up accidentally uninsured, the findings raise questions over whether auto-renewal is working in the best interests for motorists.
In all the cases reviewed by the study, drivers were not asked when taking out a policy online whether they want it to auto-renew after the first year.
Instead, by entering credit or debit card details, customers are signed up to make a further payment for year after year, without giving any further consent. There is often no way of opting in or out of auto-renewal when you buy your policy online.
Renewal notices can be unclear and confusing because they often don’t include last year’s premium price so the customer is unable to easily see how the costs differ.
Some insurers even appear to select which customers they will inform of last year’s premium and which ones they’ll leave in the dark.
Changes to the policy such as removing breakdown cover or rise in the level of excess payable are hidden in the small print. If customers don’t find this information, they could end up under- or even uninsured.
The language used, includi.ng phrases such as ‘Happy Anniversary’ or ‘You do not need to do anything’, is designed to coax customers into taking no action
Cancelling an auto-renewed policy can be difficult and costly, with some providers charging fees or making customers use premium rate telephone numbers. Some renewal notices issued online do not then allow cancellation through the same medium.
Vulnerable sections of society, such as older people, those on low incomes and those who don’t have internet access are most likely to be adversely affected by auto-renewal. For example, over 55s are significantly more likely than the younger age groups to auto-renew for numerous consecutive years.
Dan Plant, editor-in-chief at MoneySuperMarket, said: “As our report lays bare, auto-renewal is far from fair, it reduces proper competition and ultimately costs consumers big money.
“Often people have no idea that they’re agreeing to auto-renewal when they first buy their insurance policy, and would struggle to opt out even if they did. When renewal time comes around, the letter or email they get from their insurer can be confusing and misleading, and even bury significant changes to their policy. If you don’t want to renew your policy, cancelling can also prove difficult.
“This might not matter if auto-renewing didn’t cost us, individually and as a nation, so much. With an average saving of at least £113 if someone hasn’t switched for a couple of years, most people are better off not letting their insurance policy roll-over automatically. And the over-55s, those with less money, and people not on the internet suffer more than most.
“As a country, we spend over £1.3billion more than we need to just because so many car insurance policies renew automatically – that’s money many can’t afford to waste.”