It’s getting more and more costly to run our houses with food bills, gas and electricity prices, petrol prices increasing and now car insurance premiums are soaring too. According to the Automobile Association it costs almost 40 per cent more to insure a car than it did a year ago and it is expected to continue to get more expensive in 2011. The AA calculates that it costs £792 for an annual car insurance comprehensive policy. Younger drivers have been hit even harder with average premiums increasing by 51 per cent.
Simon Douglas from The AA, said: ‘In recent years we have seen intense competition encouraged by the growth of price comparison sites, which kept premiums artificially low to the point that many insurance companies were making large losses on their car insurance business.’
The British Insurance Brokers Association in evidence submitted to the Treasury Select Committee in January 2011 looking at the costs of insurance echoed The AA’s concerns and stated that for every £100 collected by car insurance companies they paid out £122. BIBA predicts that the car insurance industry will have lost £1bn in 2010. This has been caused by the increased cost of personal injury claims, fraud and the recession affecting investment returns elsewhere.
The easiest way to try and keep your car insurance costs to a minimum is to shop around for a cheaper quote when your car insurance is due for renewal. However it is essential that you don’t just look at price and make sure the policy is suitable for you and carefully check the policy features and terms and conditions. You may think that another way of reducing premiums is to opt for a higher excess – the amount you have to pay in the event of a claim. However you need to watch out as research from Which? showed that increasing excesses in some cases had little, or no effect, on the premium you have to pay. It also found that in some cases increasing the excess could even mean you have to pay a higher premium.
Which? compared quotes from a range of leading providers and found that increasing the total excess on insurance from Aviva from £350 to £550 increased the cost of the policy by 8 per cent. Increasing the excess with other insurers also had little or no effect on our quotes. Which? found that increasing the excess with the AA had no effect on the premium and with Budget, Post Office and RAC the premium went down by just 1 per cent.
Which? chief executive, Peter Vicary-Smith commented: 'Common sense would suggest that if you increase your excess, you'd pay less for your policy, but we were surprised to find that some policies actually ended up costing more.’
How to Shop Around for Car Insurance
Comparison sites can be a good way of getting lots of insurance quotes. However use more than one and make sure you are comparing like with like. Be aware that some companies aren’t listed on comparison sites, for example, Aviva and Direct Line. Watch out for higher excesses and go back to your existing insurer to see if they will match, or beat the best quote you find.
It might be worth also trying an insurance broker. You will pay a commission for finding a policy, but brokers will search for a suitable policy and could save you money. You can find a broker at www.biba.org.uk.
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