UK motorists overcharged as insurers play auto-renewal tricks

UK motorists are wasting £1.3 billion each year by staying loyal and allowing their car insurance to automatically renew, at the price of their insurer’s choosing. Not shopping around for a better deal at renewal time means drivers could be throwing away at least £113 a year each, says a new report from MoneySuperMarket that is calling for the insurance industry to clean up its act.

The report reveals that almost six million drivers (23 per cent) automatically renewed their car insurance with their existing provider when their policy was last up for renewal, without checking a single quote from another provider. Nearly one-third (29 per cent) of those who auto renewed last time their policy came to an end had not changed providers in five years, or more. Serial auto-renewing is significantly more likely among those over 55, with two fifths (40 per cent) having not changed provider in five or more years.  

Our research shows that the practice of auto-renewal may not only be leaving drivers paying too much but also locking them into policies that don’t provide adequate protection, or are even completely invalid.

Although, auto-renewal can be a benefit to drivers as it ensures that they don’t end up accidentally uninsured, the findings raise questions over whether auto-renewal is working in the best interests for motorists.

The report reveals:

For all insurers reviewed in the report, drivers are not asked when taking out a policy online whether they want it to auto-renew after the first year. Instead, by entering credit or debit card details, customers are signed up to make a further payment for year after year, without giving any further consent. There is often no way of opting in or out of auto-renewal when you buy your policy online.

Renewal notices can be unclear and confusing because:

They often don’t include last year’s premium price so the customer is unable to easily see how the costs differ. Some insurers even appear to select which customers they will inform of last year’s premium and which ones they’ll leave in the dark.

Changes to the policy such as removing breakdown cover or rise in the level of excess payable are hidden in the small print. If customers don’t find this information, they could end up under- or even uninsured

The language used, including phrases such as ‘Happy Anniversary’ or ‘You do not need to do anything’, is designed to coax customers into taking no action, and simply paying the price insurers want them to.

Cancelling an auto-renewed policy can be difficult and costly, with some providers charging cancellation fees or driving customers to expensive premium rate telephone numbers. Some renewal notices issued online do not then allow cancellation through the same medium

Vulnerable sections of society, such as older people, those on low incomes and those that don’t have internet access are most likely to be adversely affected by auto-renewal. For example, over 55s are significantly more likely than the younger age groups to auto-renew for numerous consecutive years.

Dan Plant, editor-in-chief at MoneySuperMarket, said: “As our report lays bare, auto-renewal is far from fair, it reduces proper competition and ultimately costs consumers big money.

“Often people have no idea that they’re agreeing to auto-renewal when they first buy their insurance policy, and would struggle to opt out even if they did. When renewal time comes around, the letter or email they get from their insurer can be confusing and misleading, and even bury significant changes to their policy. If you don’t want to renew your policy, cancelling can also prove difficult.

“This might not matter if auto-renewing didn’t cost us, individually and as a nation, so much. With an average saving of at least £113 if someone hasn’t switched for a couple of years, most people are better off not letting their insurance policy roll-over automatically. And the over-55s, those with less money, and people not on the internet suffer more than most.

“As a country, we spend over £1.3billion more than we need to just because so many car insurance policies renew automatically – that’s money many can’t afford to waste.”

To address the current failings in the auto-renewal process, and to tilt the balance of fairness back towards the consumer, MoneySuperMarket challenges the insurance industry to adopt eight simple best practice recommendations, they are:

Consumers should be clearly asked whether they want to opt-in to auto-renewal when first buying their policy;

Renewal notices should be in plain English;

Last year’s policy price should be displayed clearly on your renewal notice, next to the new price;

Any significant changes to policies – such as the imposition of a larger excess or removal of breakdown cover – should be clearly displayed on renewal notices;

Renewal notices should prominently warn customers they must inform insurers of any changes in their circumstances, such as a new address, change in job, annual mileage or points on their licence;

Renewal quotes should clearly include proof of any No Claims Bonus, to enable easy switching to alternative policies;

Once a customer has renewed, they must be prominently told about the cooling off period, during which it should be free to cancel;

Cancelling auto-renewal should be really simple when a renewal is received, such as a click-through button on emails or a simple cancellation form sent with the letter.