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How to buy cheaper car insurance

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Automatic renewal is the most expensive way to insure your car.
Automatic renewal is the most expensive way to insure your car.

I’ve just checked our car insurance policy and it’s time to renew again.  According to a survey carried out by confused.com motor insurance premiums increased last year by 19%.  The ABI (Association of British Insurers) put the increase closer to 10%.  I would believe confused.com’s figures if I were you.

Car insurance premiums hit record highs between 2015 and 2016, according to an industry group.

The Association of British Insurers (ABI) data found all age groups except those aged under 21 saw costs rise.

The average price paid for comprehensive motor insurance across all ages hit a record £462, a rise of 8% on the year before, according to the ABI Motor Premium Tracker.

Drivers in their late 50s faced the highest rises, at nearly 13%.

Those aged under 21 have the highest average premium at around £923 annually.

However technology used to track driving habits of young drivers meant those aged between 18 and 21 were the only age group to see motor insurance premiums fall, down 2.3% between 2015 and 2016.

The insurance industry group said premiums could rise further between now and the start of 2018 as insurers pass on costs such as the insurance premium tax and changes to the discount rate, which increased the claims for insurers.

I spent 25 years in the car insurance business so I can pass on some insider tips on how I make sure I pay the lowest possible cost.  This year could be challenge because I never like to pay more than I did previously.

First things first so I’ll let you into some secrets about motor insurance:

Car insurers love you to renew automatically because that way they hope they can get away with bumping up the premium. And they always do and hope you wont notice.

Car insurers make no money from your policy if you move away to another insurer after one year.  They have to keep you as a policyholder for at least 18 months before they break even.  This is because of the high cost of marketing the policy and the administration of setting it up. So they are desperate to keep your business, and their sales staff are heavily incentivised to do this.

If you go through a price comparison website (called “aggregators” in the trade) like Moneysupermarket.com the insurer has to pay a fat commission to the aggregator.  Price comparison websites make big profits!

There is no fixed price for an insurance policy.  Insurers calculate the premium from a whole variety of factors which include your job, your postcode, your age, the type of car, and your annual mileage. Also whether you are prepared to bargain. Each insurer weights these factors in different ways, but provided you are a reasonable risk, your insurer will always want to retain your business if possible.

Of course you can always go to a price comparison website as well, but I’ve found in the past for a lot of effort you don’t get a better price than my method.

So, whether you get a renewal notification or not, phone up your existing insurer.  You shouldn’t have to wait too long because they don’t want to lose you as a customer.  Ask for a quote for your car.  Whatever the reply, just say it’s too expensive.  If they ask you if you have already had another quote just say “no” and you would prefer to avoid the hassle of going elsewhere if possible, but their quote is too high.

The agent will then ask you to hold on and ask you to confirm your details – any convictions or speeding offences (hopefully none), excesses, etc. You must make sure that your insurer has your up to date address, that you are happy with the policy excess, annual mileage,  named drivers, valuation of your car and usage.  Usage options are private and personal use, and/or travel to normal place of business, and/or business use.

Be realistic over how much your car is worth. If it’s a write-off after an accident they’ll use their own valuation anyway.  So valuing it too high when you renew will only cost you more.

If you are recently retired make sure you make them know that your annual mileage will be less and you will no longer be using your car to drive to work or to the station. Each of these are an opportunity to negotiate further reductions.  They will then be able to requote. You should still be able to squeeze a bit more off the price.  Just remember the agent is desperate to keep your business.

Finally, ask whether “there is anything else they can do to reduce the price”.  This is their last chance so if they say no, you can be pretty sure that they have gone as low as they can.

Just to confirm what you can achieve by haggling, last year I ended up with a 23% deduction from the original quote – even lower than the original quote the year before. Insurance premiums have increased in general over the past, not least because of the big uplift in IPT (Insurance Premium Tax) last November, so I managed to cut the net cost of my car insurance by even more.

Try it for yourself next time your policy comes up for renewal.  It’s not rocket science and it really works.

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