Car insurance: don’t pay the ‘loyalty tax’

Motorists are being urged once again to shop around before renewing their car insurance following news that costs have hit record levels.

Premiums rose nearly 10% last year, and statistics released by the Association of British insurers (ABI) show that tax increases, higher repair costs and the continuing increase in the cost of whiplash injuries led to a rise of nearly 5% during the last three months alone of 2016.

The average price paid for comprehensive cover was £462 during the final quarter of the year – a rise of 4.9% on the previous quarter. The £22 increase represented the second highest quarterly rise recorded.

“These continue to be tough times for honest motorists,” said the ABI’s Rob Cummings.

“They are bearing the brunt of a cocktail of rising costs associated with increasing whiplash-style claims, rising repair bills and a higher rate of insurance-premium tax (IPT).”

Kevin Pratt, of price-comparison service Moneysupermarket, said: “Anyone renewing their policy should be acutely aware of how premiums have soared in the past couple of years, and should certainly not automatically renew with the same insurer without checking what else is available.

“If you stay with the same firm, it’s a pound to a penny your premium will be increased, but if you shop around you’re likely to find a company that will offer you a better price, simply to win your business.”

That message was echoed by Matt Oliver, of Gocompare, who said people who failed to switch were effectively paying a “loyalty tax”.

“While insurers say there are several reasons behind rising car insurance prices, which include rises in IPT and increased whiplash claims, people shouldn’t take these rises lying down,” he said.

“It’s now more important than ever to make sure you’re not getting a raw deal at renewal. Loyalty doesn’t pay when it comes to car insurance, with the best deals nearly always going to new customers. This means it’s unlikely you’re being offered the best possible price on your renewal letter.”