Car insurance is a legal requirement for all motorists who are driving on UK roads and it is their responsibility to find suitable insurance cover. As policies draw to a close, the all-important renewal period approaches when motorists can decide whether to stay with their current insurer or search for a new one.
If you decide to stay with your insurer and you previously paid by direct debit, your policy for the forthcoming year could auto-renew. This means your insurer will renew your policy automatically without you having to lift a finger. In this article, we will explore whether auto-renewals are a good idea for motorists, weighing up their potential costs with the simplicity of staying with the same insurer.
Does loyalty pay?
The customer is quite literally in the driving seat when it comes to choice and the options they have at their disposal when they are looking for insurance. A customer’s loyalty could be swayed by the quality of the customer service they have received, especially if they have made a claim during their period of insurance. Or perhaps a competitive price or the ease of buying insurance are key areas that secure a customer’s loyalty?
When it comes to car insurance renewal some customers may think it is a benefit if the policy auto renews, saving them time and effort. However, if the price is not right or the conditions of the policy no longer apply, the customer’s loyalty disappears as they take their business elsewhere.
However, the renewal pricing will depend upon a number of factors such as: the number of claims the customer may have made during the last twelve months, the rate of Insurance Premium Tax imposed by the Government, the percentage of claims made across the industry and whether the customer’s personal details or vehicle have changed.
The auto renewal process
In 2017 new legislation from the Financial Conduct Authority (FCA) stated that all renewal notices sent to customers should include the quote for the renewal insurance shown alongside the premium for the previous year’s insurance.
The initial renewal notice would generally arrive three to four weeks before the end of the policy, giving the customer the opportunity to review their details before the insurer sends them their renewal notice with the renewal quotation and confirmation if the policy will auto renew if the insurer doesn’t hear anything from the customer.
Cancelling your car insurance renewal
It is compulsory for customers to receive a renewal notice from their insurer before their car insurance policy expires. A renewal notice should be sent via email or post. If you’ve previously paid for your car insurance by direct debit, generally speaking the policy would auto renew, but you can check the terms and conditions of your policy or contact your insurer to make sure because driving without insurance in the UK is illegal.
A common misconception is that you are obliged to accept the renewal price. However, this is not the case - if don’t want to auto-renew your policy with your insurer you can contact them and cancel this process. Always check with the insurer about how to cancel the policy because not all insurers may accept a phone call. They may require something in writing to confirm that you would like to cancel the policy. It is important that in any correspondence you have with your insurer in terms of your cancellation you note the date, time and who you have spoken to.
What if you forget to cancel your policy?
If for whatever reason you have missed the opportunity to cancel the auto renewed policy, you still have the chance to cancel the policy. The law states that motorists have what is known as a ‘cooling off’ period of 14 days from your renewal date in which you can cancel the policy.
When you contact the insurer to cancel the policy, check what payments are owed to the insurer because you have requested to cancel the policy. You will have to pay for any days that your policy was on cover and you will probably be charged an administration fee to cancel the policy.
How else can you save on your premium?
With the increased cost that can come with the auto-renewal policy, many in the industry have dubbed such a renewal as a loyalty tax.
There are ways that you could save on your renewal premium:
1. Stay with your insurer – once you have received your renewal notice showing the renewal price, you could of course contact them to re-negotiate the price.
2. If your current insurer is unable to offer you a more competitive price for your insurance you can take the next steps by searching the market. There are a number of comparison sites or insurers you can buy direct from by completing a few details online to compare prices.
3. Alternatively, always check that your personal details are up to date and accurate. Have you thought about increasing the voluntary excess on your policy or reducing your annual mileage?
4. Another option you could consider is how you pay for your insurance. If you’ve previously paid by direct debit this is the more expensive option compared to paying for your insurance in one payment. It really does depend upon your personal circumstances.
The Be Wiser website is a fantastic place to start. It will only take you a few minutes to find a wide range of insurance cover at competitive prices and may be cheaper than the auto-renewal quote from your current insurer.