Tips for getting better-value insurance

Today, the financial regulator announced that it would push for insurers to end the so-called “loyalty premium”, where customers end up paying hundreds of pounds more each year for the same policy.

The Financial Conduct Authority (FCA) says anyone renewing their home or car insurance should pay exactly the same as they would as a new customer, unless they’ve made claims or their circumstances have changed. These “radical” reforms would save consumers £3.7bn over 10 years and are a massive threat not only to insurers’ profits but the business models of comparison websites too.

I spoke about the changes on BBC Breakfast this morning and welcomed them overall, though it remains to be see whether a) how they will be introduced after the consultation ends early next year and b) whether insurers will start pushing up prices for new customers instead.

The changes won’t come into force until after ‘renewal season’ this year, so if you have car or home insurance, you still need to take action. Your policy is likely coming up for renewal and unless you shop around, you’re likely to pay a lot more.

Lots of young people have also seen a big change in their circumstances as a result of Covid-19, so it’s especially important that they don’t let their policies roll over when they may no longer cover their situation or be too expensive for what they offer.

My tips are as follows:

  • Start looking for a new policy about three weeks before yours is coming up for renewal. Set a reminder on your phone, make a note in your calendar, do whatever it takes to nudge yourself to start shopping around. You can also use an app like Emma, Snoop or Moneyhub to remind you, but you’ll still need to go online or speak to a broker to search the whole market. These apps will point you towards new deals but they may not automatically be the best option for you.
  • DON’T rely on comparison websites. Use more than one, as they all differ in what they offer, and remember that they don’t host all the insurance deals on the market. Some firms like Aviva and Direct Line don’t use these sites so you’ll need to check what deals they offer too. Comparison websites often present deals that look very cheap but come with hidden catches – some insurers set their voluntary excess (the amount of any claim not covered by the insurer) at a high level to make sure they come out cheapest, and a lot of the policies are very basic. They might not offer the level of cover you need so I’d be minded to be speak to an insurance broker if you’re not certain. Brokers don’t cost more – like comparison sites, they earn money from commission paid by insurers. But they can search the whole market on your behalf to make sure you’re getting the best deal. Check out their Find a Broker service.
  • Compare like-with-like. Trading down to a cheaper policy may seem like a good moneysaving ruse but it’s a false economy if you’re missing out on crucial cover. Make sure you’re filtering your search with the right, up-to-date information and don’t rely on pre-filled forms or criteria.
  • If you’re a young driver, check out black box insurance insurance if you haven’t already. These reward you with lower premiums if you drive safely (but punish you if you drive badly, so watch out).
  • Make sure you’re not doubling up your insurance. Many bank accounts offer insurance these days but you need to check the small print as to what it really covers.
  • Insurance policies are ridiculously long and complicated but make sure you at least understand the key features and exclusions.
  • Be honest and accurate when making insurance applications. Any mistakes or fibs could come back to bite you if you make a claim in the future.
  • Finally…you might not even to have to switch if you pull off a good haggle! Phone up your current insurer and tell them you’ve found a cheaper quote for the same cover elsewhere. They may just match it!

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