Aside from rent or mortgage payments and utility bills, our cars are usually our biggest expenses. So, you’d think we’d do whatever we could to keep our motoring costs as low as possible, wouldn’t you? Despite this, around 17 million people in the UK are overspending on their car insurance.
If you want to know how you can cut your car insurance costs, read on.
[top_pitch]
The simple mistake that makes people overpay
We’re all very busy and are often trying to cram far too many tasks into any one day. Therefore, when your car insurance provider gives you the option to auto-renew your policy, it can seem like a great idea.
MoneySuperMarket’s car insurance research estimates that 17 million drivers let their car insurance auto-renew last year, costing a total of over £830 million.
The price comparison site found that 52% of drivers let their insurance renew automatically in 2021. This is a 27% increase from 2020, when 41% auto-renewed their car insurance. The reasons drivers gave for doing this varied.
Of those surveyed, a quarter (25%) did look around but stayed with their existing provider as it was easier. This is a 20% increase from last year.
Meanwhile, 14% didn’t switch because they believed that changing car insurance provider takes too much time or effort, while 19% don’t believe there are significant savings to be made.
It’s true that auto-renewal saves you time and the hassle of shopping around. However, as companies increase their premiums, it can cost you a lot more.
[middle_pitch]
Why auto-renewing your car insurance is dangerous
Drivers that auto-renewed their car insurance saw their premiums increase by £49 on average. This is a significant amount, particularly when budgets are being squeezed by the cost of living crisis.
This is a 17% increase from 2020 when drivers claimed to see an average increase of £42.
Looking between regions, drivers in London reported the biggest average rises to their premiums at £79, followed by drivers in Northern Ireland (£61) and drivers in the West Midlands (£60). Welsh drivers saw their premiums increase the least (£39).
The research shows that drivers are still opting to auto-renew despite new rules from the UK financial regulator, the FCA. These are designed to ensure providers highlight a customer’s previous year’s premium price against their renewal price. The results showed that 48% of drivers did not recall seeing these notifications.
Of those that did remember seeing the notices, 72% said they did not encourage them to shop around.
How much you could save by shopping around
The exact amount will vary depending on your current car insurance policy and what other providers are offering.
However, it’s likely other providers will at least match your current price. This means you’ll save the auto-renewal premium – so an average of £49 in 2021. With inflation being so high currently, this amount could be even larger for those updating their car insurance policy later this year.
The experts’ view
Sara Newell, car insurance expert at MoneySuperMarket, said: “Last year, more drivers renewed their car insurance with their existing provider than did not.”
These motorists reported average premium increases of £49. This means that collectively, UK drivers overspent on their premiums to the tune of an estimated £830 million.
“While we have seen the introduction of the FCA’s new rules on price walking – which are intended to level the playing field for consumers – it’s important that drivers don’t rely on such measures to reduce their premiums,” Sara warned.
“We’ll monitor the impact of the FCA’s new measures over the coming months, but the fact remains that shopping around is always going to be the most effective way of keeping your costs down.”
The post Avoid the car insurance mistake costing UK drivers £830 million appeared first on The Motley Fool UK.
Is this little-known company the next ‘Monster’ IPO?
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.
The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.
But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.
Click here to see how you can get a copy of this report for yourself today
More reading
Why the BP share price might be the FTSE 100’s biggest bargain right now
The Hargreaves Lansdown share price slumps 20%! Should I jump in?
6% dividend yield! 2 UK shares I’d buy in February and hold for 10 years
2 top AIM shares I’d buy today
3 passive income ideas I’d use with £1,500
