Car insurance: beat the price hike

Friday March 2, 2007Guardian Unlimited
Is your car insured with Norwich Union, the AA, Admiral or Quinn? Then it may be time to ring round when the renewal notice lands on your doormat.
Figures obtained by Guardian Money reveal they are pushing premiums up, while the best deals are being found at More Th>n, Zurich, the RAC and Swiftcover.
The range of premiums quoted by companies vying for your business has never been wider. Some motorists could easily save £200 or more by shopping around, while others will miss out by simply renewing, say industry experts.

Price differentials are widening because three of the largest insurers (between them they dominate 50%-60% of the market) are all trying to up prices.
Last September, Norwich Union announced it was looking to hike premiums by an average of 16% - with young motorists looking at possible increases of up to 40%.
The RBS group, which includes the Direct Line, Tesco and Churchill brands, followed a few weeks later by saying it was looking to increase rates by 5%-6%. Royal & Sun Alliance has talked in similar tones - although it owns More Th>n, which is currently the cheapest provider according to search engines which compare thousands of insurance quotes every day.
All three said they are raising premiums to cover the increased cost of claims.
A few months on, drivers who have enjoyed almost static premiums in recent years are wondering whether those days are over. "Companies are relying on what has become known as the 'boiling the frog' principle," says Richard Mason, head of insurance at Moneysupermarket.com.
The theory is that a frog will immediately jump out of hot water, but will sit there until it dies if the water temperature is slowly increased. Consumers should be aware that several insurers are adopting similar tactics.
"Companies have realised that if they hit buyers with a massive increase at renewal time, they will jump out of the pan. The hope that by pushing through a small increase, consumers will decide they are too busy to shop around," says Mr Mason.
Moneysupermarket, which processes 26,000 car insurance quotes a day, says a buyer who has been claim-free for the previous year should still be able to reduce their premium by around 5% by switching supplier.
"The UK market always has companies trying to gain market share and, as a result, quoting competitive rates. The companies doing so at the moment (which should be worthy of a quote as a result) are the Post Office, Barclays, Quinn Direct and Swiftcover. Liverpool Victoria should be added to that list - it recently said it wanted to become a top-five insurer within five years," says Mr Mason.
Fellow insurance aggregator, Confused.com, tells a similar story. It has analysed its quotes received over the last six months.
The table (above) shows the companies that are trying to grab market share by lowering prices - and ones that are trying to up the heat. Debra Williams, Confused's managing director, is predicting that premiums will be forced to rise by a minimum 10% to cover the fact that some companies are paying out £109 in claims for every £100 generated in premiums.
"While some insurers have steadily increased premiums over the last six months, others have decreased prices. Whether this is the industry's usual dynamic pricing activity, or a sign of things to come, remains to be seen.
"Specialist brands are thriving, as policies are increasingly being tailored to target segmented areas of the market, such as the elderly or women-only. We are also witnessing the emergence of value-add incentives, used as bait to entice customers away from existing, or similarly-priced, insurers, eg £50 cash-back (Post Office), handbag cover (Diamond), free MOT (Kwik-Fit)."
A spokeswoman for RBS, which deliberately does not allow its brands to be compared by the comparison sites, says: "In addition to controlling claims costs, over the past three months RBS Insurance has been required to increase new business prices by 5% across our key brands, in order to mitigate the impact of claims inflation.
Our approach is to introduce increases on a progressive basis, rather than presenting customers with an excessive and unpalatable one-off increase at renewal."
James Harrison, chief executive of the comparison service insurancewide.com, says his company has noticed some groups of drivers are being asked to pay more at renewal time.
"The increases aren't across the board, but it's clear that underwriters are targeting some groups more than others. Young drivers have been hit over recent months - quotes overall seem to be rising around 3%," he says.
He disagrees with Richard Mason that competition will be enough to keep premiums down. "The difference between this, and other years, is that there is no one company trying to grab enough market share by coming in with dramatically low prices. Last year it was Swiftcover; this year I can't see it happening in the same way, and premiums will have to start rising as a result.
"The message is clear you have to shop around at renewal time - even if you want to stay with your existing company. It gives you a price to start haggling with," he says.
Meanwhile, if you can't be bothered to seek out cheaper quotes, Barclays will "beat the cost of your current car insurance quote, and, if not, we'll refund the difference by up to £100 and give you £50 when you switch." The Post Office has a similar deal.
Here are some examples of the car insurance premiums on offer
Married female teacher, 35, living in Manchester, driving a Ford Focus (1.6, 53 registration) 10,000 annual mileage, full no claims. Price range: £396-£456. Lowest premiums: Lancaster, Endsleigh, Kwik-Fit. Single male banker, 26, living in London, driving a BMW 3 series (54 registration), full no claim years, 10,000 annual mileage. Price range: £560-£619. Lowest premiums: Kwik-Fit, Swiftcover, Endsleigh. Married female artist, 55, living in Surrey, driving a Citroen Xzara (99 registration), 10,000 annual mileage, full no claim years. Price range: £233-£264. Lowest premiums: Motor Quote Direct, Swiftcover, its 4 me, Direct Choice.