UK car insurers punishing customers for loyalty

With a debate in the Dáil yesterday on the rising cost of insurance, it’s interesting that across the pond UK car insurers are punishing customers for their loyalty, rather than rewarding them.

Despite a pledge by the UK’s Financial Conduct Authority to stamp out the unfair and underhand practice of increasing costs for loyal car insurance customers, a recent study shows that car insurers are ignoring this.

The Times of London recently highlighted a study that shows that over six million UK car insurance customers fail to look for a cheaper deal when renewing their policy. With insurers imposing a £110 premium on loyal motorists who fail to switch to a cheaper rival, that means that car insurers are overcharging by about £660 million.

The study was conducted by comparethemarket.com, the UK car insurance comparison site made famous by Russian meerkat Aleksandr Orlov and his family. (Aleksandr has been good for advertising. When the campaign was first launched, the number of monthly unique visitors to the site jumped from 218,000 to 1.1 million in one year.)

The study shows that motorists are being overcharged by a record amount, based on the widening of the gulf between average renewal quotes and the cheapest policies on the market. In the first three months of 2016, motorists were forced to pay an average of £682 for fully comprehensive cover, even though premiums of £572 were available for those who shopped around.

The premium on loyal customers in the UK is now at the highest it has been for four years. Motorists under 25 are particularly vulnerable, and are being forced to pay the highest loyalty premiums of almost £245.

Simon McCulloch, who runs the comparethemarket.com website, says that passivity on the part of motorists is pushing up the cost of premiums. “Inertia of some motor insurance customers has been the real driver of the premium increase. By not shopping around, consumers are inadvertently sending a message to insurers that they are happy to pay more for their cover. ”

In Ireland, the quoteme.ie website helps motorists – both existing and new customers – find the most competitive car insurance quotes.

Tips when hiring a car abroad

With thoughts of booking summer holidays on the horizon, we’ve put together some useful tips on car hire abroad to make sure it’s a stress-free experience:

  • When hiring a car abroad, make sure that the requested insurance cover is documented. Ask specifically if the car provided will be fully equipped to meet all the legal requirements of the country being visited
  • Familiarise yourself with the rules of the road of the countries you intend to drive in
  • When collecting your car, ask the rental firm about their procedures should it break down and the emergency number to call
  • Check that your rented car has emergency equipment. Check all the switches, indicators and other controls – if any are unfamiliar or don’t work, ask the rental firm for guidance
  • A good phrasebook will come in handy for communicating with a policeman, breakdown recovery firm or garage
  • If you are looking for the best bargain, remember that prices quoted online often only contain the basics. Check what is included in the final quote and what is not. Pay special attention to airport surcharges and insurance cover
  • Check the cost of extras that you will need during your rental: child seat, additional driver, extra insurance etc.
  • Carry your driving licence, original vehicle registration document and passport; you may be asked to produce any one of these items. A provisional licence is unacceptable and the minimum driving age in most countries is 18
  • If you are staying in the EU then you do not need an international driving permit. However it is still worth having one as some hire companies insist on them
  • Remember that children under 12 and/or 1.5 metres in height are not permitted to travel as front seat passengers in some countries

Examples of insurance fraud

The Coalition Against Insurance Fraud in the USA conservatively estimates that insurance fraud costs $80 billion a year in stolen claims, not including the social costs. When you add the lost productivity of businesses, the lost life savings of individuals and the cost to investigate and prosecute, the total figure is much higher.”

Here are some examples of fraudulent insurance claims:

Isabel Parker, the 72-year-old queen of the slip-and-fall scam, prostrated herself in department stores, supermarkets and liquor stores 49 times for claims totaling $500,000 during her long career, a sad byproduct of her gambling addiction.

Carla Patterson tried to tap a Virginia restaurant for a $500,000 insurance settlement after discovering a mouse in her vegetable soup. But the national chain investigated and found that the mouse had no soup in its lungs and had not been cooked. Patterson was sentenced to a year in prison.

Nicholas Di Puma of Walton, N.Y., torched his home and his convertible to collect on his homeowners and auto insurance. He claimed that it all started when pans on his stove ignited. After trying to extinguish the inferno with a rag, Di Puma said he threw the first pan out the door, where it landed in the backseat of his convertible. While en route to tossing the second pan outside, he tripped and the pan landed on his couch. Unbelievable? That’s what local law enforcement thought, too. He received five years of probation — and no insurance benefits, of course.

Insurance agent James Lee Graff robbed some 30,000 people of more than $40 million in stolen health insurance premiums, leaving them to pay medical bills from their own pockets. The clients paid Graff their premiums, expecting him to forward the money to the insurance company. But instead, Graff pocketed the money and issued a fake policy that looked real. But the clients remained completely uncovered.