Do we
even make mistakes buying car insurance?
The
ever-increasing number of consumer
comparison sites for
motor insurance seems clear evidence that price is the
primary factor which determines our choice when
purchasing motor cover. TV and media advertising
likewise focus our attention on potential savings, and
thus it would seem the present market favours consumers
who stand to benefit from such healthy competition.
Indeed, MPs on the Transport Select Committee have
recently confirmed that ‘premiums (have) fallen by 34
per cent in the last year’.
Back in the days before comparison sites, insurance
brokers advised consumers about suitable motor insurance
at an affordable price. Then, the dual aim of a broker
was to deliver the right cover at the best price.
However, today’s technology, which can even
deliver single day policies efficiently, and
‘market-best’ prices to our screens in seconds, is
optimised for price comparison, and largely skips the
‘broker advice’ function – an interactive discussion
with an industry professional about our motor insurance
needs.
Does this matter? Well, the answer is no and yes. No, it
does not matter because we can be sure all UK policies
meet the insurance requirements of the Road Traffic Act,
therefore, no laws will be broken. Yes, it may matter
because too many of us never read our policy documents.
Consequently, we only ever discover the downside of a
particularly poor purchase choice – if there is one –
when a mishap occurs, which is when we really expect our
policy to deliver just ‘what (we believe) it says on the
tin’. In a nutshell, motor insurance has moved into an
era when you mostly ‘get what you pay for’, whilst many
of us still imagine our policies will cover most things
that could happen on the road, beyond running out of
petrol.
Developing this point, ‘old school’ motor insurers,
justly proud of their longstanding reputation for
quality of service, do exist in today’s marketplace, but
so to do companies who charge a market-competitive rate
to meet their contractual obligations under your policy
– and nothing more. The modern reality is that companies
who still buy into a ‘traditional values’ model tend to
charge high-end premiums. Of course, they have great
bargain offers from time to time, and brokers can still
spot these deals, but the rest of us miss out.
What we’re missing often becomes apparent when we make a
claim. There can be a vast difference in attitude and
approach between companies handling the same issues.
Some will focus on what they can do for you, whilst
others handling the same situation may appear to focus
mostly on what is not covered. Claims settlement is the
sharp end of the process where some insurers may be
under more pressure to drive down costs, perhaps so they
can keep those keen prices we all love. Claims
settlement is also a company’s best opportunity to build
a truly positive customer image
It is generally true that cheaper prices are achieved by
limiting the scope of cover offered. This is all too
obvious if the great quote you are offered carries a
£500 claims excess, but the trimming back of customer
benefits is usually less transparent than this. The
detail is written into your policy terms and conditions,
where most of us will never look to find it. There is no
such thing as a ‘standard’ comprehensive motor policy.
What is covered is broadly comparable and has developed
through many years of custom and practice, but the trend
has been to gradually reduce cover to keep down costs
and premiums.
In such a climate, where cover is narrowly-defined, it
becomes really important to know your needs are really
covered. For example, with cover for ‘social, domestic
and pleasure’ use, shopping is covered, but not driving
to work – which is commuting. If commuting is covered,
you can drive to and from work, but any use of your car
at work will be deemed business use, which is not
covered. Similar restrictions apply to towing, if your
policy covers this at all. There may be restrictions on
the size and type of what you can tow, and restrictions
on the cover (third party only on what you are towing),
alongside possible exclusion of cover whilst towing
abroad.
Besides cover restrictions, some insurers are adopting
other practices to make ends meet. New research from
Which? suggests a whole range of additional policy
charges are made when customers request changes. These
costs can be a nasty shock. Advance warning of policy
administration fees, if available at all, is often
buried deep within policy documentation. In one example,
just 12 out of 37 household-name insurers would issue a
duplicate certificate for free, whereas the rest would
charge up to £26 for the service. Elsewhere,
cancellation fees, to end a policy before its normal
expiry, were quoted at £40 on average, with one insurer
asking £70, and only four companies making no charge.
Deploring the findings, Richard Lloyd, Which? executive
director, said: ‘Fees… should not be used as an excuse
to squeeze more money from consumers who have little
choice but to pay.’
One extra charge we can all avoid is paying an annual
premium by instalments. Paying monthly can attract an
APR of up to 30 % where, by comparison, using a 0%
purchase credit card to spread the payments would
represent a substantial saving.
In summary, it is vitally important to research and
understand the cover you are offered. Not only will this
knowledge help you evaluate true costs, the
understanding gained will help you negotiate genuine
savings and avoid unwanted cover. For example, vehicle
manufacturers regularly offer ‘extras’ to boost sales
and some have ‘free’ courtesy car schemes when your
vehicle requires an accident-damage repair. This in turn
means you can look at motor insurance quotes without a
‘courtesy car’ benefit, potentially producing a genuine
saving for no reduction in cover – just one instance
where it pays to know what you’re buying.
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