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Money & Rights

Put the brake on car premiums

The cost of motor insurance is rising much faster than inflation. Harvey Jones reveals how to keep the premiums down

If you renewed your motor insurance policy recently, you won't need reminding that premiums are accelerating at a breakneck pace.

The average motor insurance policy costs almost £200 more than five years ago, putting further pressure on people's wallets by rising far faster than earnings.

The good news is that you can drive the cost back down, provided you pay attention when your policy comes up for renewal. Do not simply accept what your insurer is offering; put your foot down because these days, you can't afford not to.

Get moving

The average comprehensive motor insurance policy now costs £758 a year, up from £559 in November 2012, a rise of £199, according to research from comaprethemarket.com

Separate figures from confused.com put it even higher at £847, up 18 percent in a year. That is six times inflation and more than eight times wage growth at 2.2 percent, adding £132 to every policy.

Simon McCulloch, director at comparethemarket.com, says the direction of travel is clear. "Motorists are paying record high premiums but it is not all doom and gloom; you can make significant savings by shopping around." The worst thing you can do is allow your policy to automatically renew, as insurers reserve their best deals to attract new business while letting loyal customers languish on more expensive rates.

City watchdog the Financial Conduct Authority recently forced insurers to display last year''s premium on renewal letters to show motorists how much they are charging, but this has had minimal impact. Insurers also reassure customers they do not need to do anything for their policy to continue and this works, ass many people are too lazy or short of time t shop around for cheaper quotes. 

However, the message is being driven home as 39 percent say they switched insurer last year, and only 15 percent rolled over without checking the price, according to research from GoCompare Car Insurance.

How much you can save by switching caries, although comparison sites typically quote around £250. GoCompare spokesperson George Frost says that to avoid the 'great auto-renewal swindle' you should make a note of your policy renewal date and take time to make other arrangements.

"Always check your new price is competitive even if your insurer was cheapest last year," she says.

If you decide to move on, do not simply go for the cheapest policy but make sure you are comparing like with like. "You must understand all the charges, and penalties,, exclusions and terms and conditions you will be required to meet," she adds.

What look cheap at first can often increase hugely when add-ons such as motor legal protection, breakdown cover and guaranteed hire car cover are included. If your premiums still look too high, consider paying a higher voluntary excess on claims- for example, lifting it from, say, £100 to £300, you will have to pay £450 of a claim.

Lee Jones, founder and managing director of FreeMotorLegal.co.uk, says you need to act before your policy renews. "Afterwards, you would have to pay a cancellation fee to get out of a bad deal."

Price comparison sites, such as comparethemarket, confused.com, gocompare, moneysupermarket.com and uSwitch.com, are one of the quickest ways of finding a more competitive deal, but do not rely on them. Aviva and Direct Line do not feature, so you could consider approaching them direct.

If you are keen to remain with your current insurer, get rival quotes then use these to negotiate a discount- you will be surprised how flexible they will be.

Ne honest

If you want to get the best policy , it pays to be honest. Unfortunately, more than four out of five Britons risk accidentally invalidating their car insurance by telling white lies in a bit to slash premiums, according to recent research from VoucherCodesPro.

Resist the temptation to tell white lies- for example, underestimating your annual mileage, failing to reveal you use your car for commuting, omitting to mention modifications or hiding prior insurance claims and accidents. This gives your insurance company an excuse to void your policy in the event of an expensive claim.

Supplying accurate information can work in your favour, says AA Insurancespokesperson Ian Crowder. "Inform your insurer if your annual mileage is lower than you estimated, you park on a driveway or in a garage, or have fitted a car alarm or immobiliser, as the could throw your premiums into reverse." 

Downsizing

Another way of cutting your motor insurance premiums is to but a smaller,, cheaper car, Mr Crowder says. "Mass-market runabouts are likely to need fewer repairs, parts are easier to source, and labour costs are also lower. As a result, owners are typically rewarded with lower insurance premiums."

Recent figures from Warranty Direct show that makes such as Smart, Kia, Seat, Ford and Hyundai have some of the fewest claims, while Japanese vehicles like Honda, Subaru, Suzuki and Toyota are particularly reliable.

Younger motorists

If you thought motor insurance was expensive, spare a thought for young drivers. The average 18 year old now pays a punishing £2334 a year, often more than the price of buying a used car. By comparison, the average 66 year old pays just £467, according to confused.com.

No wonder there has been a reduction in the number of millennial's hitting the road: just 29 percent of 17 to 20 year olds hold a full-licence, down from 35 percent a decade ago, and the decline is set to continue.

The annual cost of running a car eats up 20 percent of the average £14,402 take-home salaries of drivers under 22, according to research from insurer Cuvva. the firm is pioneering app-based pay-as-you-go subscription cover, where occasional drivers pay a fee to comprehensively insure their car when it is parked, plus a modest hourly rate when they actually drive. Cuvva’s 

figures suggest that a driver aged between 21 and 24 would typically pay £1298 a year on average to cover a Vauxhall Corsa. With Cuvva, they would pay an annual subscription of £405 plus £4 for every hour driven, saving £461 a year for someone who drives just 10 hours every month. It is an interesting option but could backfire for frequent motorists.

Many parents have been tempted to help their children by insuring the car in their own name, then adding the younger driver as a named occasional driver, when in reality it is their car. This is called ‘fronting’ and more than half of parents have considered it, but it is also illegal and you should resist the temptation, says Matt Oliver, car insurance spokesperson at GoCompare.

“A better option is to add the parent as a named driver, which can reduce insurance premiums significantly.”

Black box technology

Safe and careful drivers might be able to put a brake on their premiums by installing a black box to monitor their motor. Specialist telematics policies involve fitting a ‘spy-in-yourcar’ gadget that measures your speed, cornering, acceleration and braking, as well as your location and the time of day you drive, and even whether you take breaks on long journeys.

If the black box judges you to be a low-risk driver, your insurer should grant you a lower premium. Telematics is mostly targeted at younger motorists keen to disprove a risky reputation, but it may work for older drivers as well.

Insurer Admiral has reported a 25 per cent rise in customers on its LittleBox policy, to 200,000 in the last year. A host of other insurers offer this option, with policies from established names such as Aviva Drive, Direct Line DrivePlus, Hastings Direct SmartMiles, Tesco Bank Box Insurance and Co-op Insurance Smartbox.

There is also a growing band of specialists such as Bell, Carrot, Coverbox, DrivePlus, Ingenie, Insurethebox and Marmalade.

Gunnar Peters, head of telematics at Admiral, says eligible drivers can cut their premiums by between six and 23 per cent by switching to telematics, and also improve their driving.

“You can log into your personal dashboard to see how you're driving and get tips to help you drive safely and gain the best discount.”

He says the gadget is fitted out of sight behind your car’s dashboard. “You don’t have to activate it before setting off but can drive as normal and won't hear a peep from it.”

The under-25s have seen their car insurance premiums drop slightly over the past year, according to the Association of British Insurers (ABI), while the over-50s have seen theirs rise 12 per cent. Telematics may have played a part.

However, older drivers are likely to get smaller reductions, given that they are already more likely to be safer drivers and pay lower premiums. If you drive regularly at night or during rush hour, when accidents are more likely, the benefits may further decrease.

What do you think of car premiums? Got something to share? 

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