Auto Insurance Companies Use Loopholes to Keep Costs High for Loyal Customers | Car insurance


According to motorists who contacted Guardian Money, car insurance premiums for renewing customers can double the price quoted for new ones despite a recent ban on loyalty penalties.

A customer was told their renewal premium would be £368.74, but similar cover with the same company was listed at £215.22 on a price comparison website. When he complained, his renewal price was revised down to £245.

Since January 1, insurers have been prohibited from overcharging loyal policyholders in order to finance discounts to attract new customers. According to the Financial Conduct Authority (FCA), which implemented the ban, 6million customers who stayed with their provider overpaid £1.2billion in 2018. It estimates the new rules will allow consumers to save £4.2 billion over 10 years.

MoneySavingExpert founder Martin Lewis says “it’s hard to tell if insurers are playing games.” Photography: Antonio Olmos/The Guardian

However, consumers who assume the ban allows them to get up without paying a price might be shocked. The loopholes in the new rules mean they may still end up spending more renewing an existing policy than buying a new one from the same provider. Businesses are still allowed to distinguish between new and existing customers based on when and how they request a quote.

Martin Lewis, the founder of MoneySavingExpert, says that while some loyal consumers will save money with the new rules, they may struggle to determine if they are being charged fairly. “The [loopholes] that means there’s wiggle room in the system, so it’s hard to tell if insurers are playing games,” he says.

An FCA spokesperson said consumers should still shop around. They added: “We use a range of tools to assess company compliance, including in-depth analysis of company reporting data, as well as consumer and market intelligence.”

Several hidden factors can increase the price for new and existing customers.

The ‘channel’

Car insurance renewal reminder circled on a calendar
Businesses are still allowed to distinguish between new and existing customers based on when and how they request a quote. Photograph: Kevin Wheal/Alamy

That’s jargon for the method you use to request a quote. A channel can be a call center, a walk-in location, the insurer’s website, or a price comparison site. Insurers only need to ensure that a renewal premium matches that offered for a new customer if they apply for a similar policy through the same channel used by the existing customer.

If the renewing customer purchased through a call center or the insurer’s website, their premium is still likely to cost more than the same policy sold through a comparison site. Companies are allowed to offer different rates to customers based on the many comparison sites they use. This means that a consumer who bought car insurance through Moneysupermarket three years ago may be charged more to renew than a new customer buying the same policy from To make sure a renewal quote is fair, you need to remember how you originally signed up for the policy and check pricing for new customers on the same channel.

The Date

Price matching only applies to new quotes issued on the same day that a renewal quote is generated. It’s news to many consumers that premiums can fluctuate for new and existing customers depending on the date and time of day they seek a quote. As a general rule, premiums increase the closer you get to the date you want coverage to start. This is because insurers believe that those who fly by the seat of their pants could be riskier on the road.

retro alarm clock
The time you use search engines can make a big difference in car insurance quotes. Photography: Stephanie Frey/Getty Images/iStockphoto

However, early risers can also be disadvantaged. A 2019 survey by MoneySavingExpert found that customers who renewed as soon as possible, usually 30 days before their policy expired, paid an average of £388 a year more than those who waited a week. According to the website, 24 days before renewal is the optimal time for a great deal and can save you almost 40%.

The time

The time you access search engines can make a three-digit price difference. Prices go up and down based on the number and demographics of people who requested quotes that day. If a company has just recruited a large number of new drivers, it may increase the price of other new drivers to deter them.

Evening searches tend to yield more expensive quotes than early morning searches and night owls looking for deals in the wee hours could end up losing hundreds of pounds as they can be seen as wild insomniacs who exhibit a driving risk.

Additional modules

FCA rules apply to comparable policies. Some loyal customers may rack up unrequested add-ons over the years without even realizing it, and these are ultimately reflected in the renewal price. Check your existing policy to see if benefits such as foreign driving, personal accident, and equipment coverage are necessary for you before comparing the quote online.

Other Things

The price of a bounty is often based on seemingly random factors, and a few tweaks to an app could bring it down. Young drivers, for example, can sometimes benefit by adding an older driver to their policy. Insurers may be scared off by some job titles, but not by other descriptions of the same role. One reader was cited more when they chose dental surgeon from a drop-down menu than when they described themselves as a dentist, while illustrators seem to be considered less risky than artists.

Finally, make sure you are registered on the electoral lists. Insurers tend to use it for identity verification and if your absence makes this job more difficult, they will charge you in the quote they give.


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