In car insurance, as in energy tariffs and mobile phone contracts, there are no loyalty cards; no five stamps that earn you a sixth year of coverage for free; no perks for the faithful. In fact, insurance companies often hike up the premiums for their most dependable customers, banking on their inertia and customer satisfaction or just their weary shrug when they get their next bill, even if it’s higher than the last one. But as with many other contract products, shopping around for a more competitive quote and switching provider can shave significant sums from your bills. Comparing quotes for car insurance and switching policies at the end of each contract can save motorists upwards of £250 a year on their premiums.
If switching pays and if comparison engines make finding the cheapest coverage easier than ever, why aren’t more motorists doing so? Partly because car insurance companies have made apathy the default, with a devious courtesy called automatic renewal. With the automatic renewal, your 12-month contract will just—poof—continue for another year with you barely even noticing—or so the insurer hopes. And it works: reportedly, a third of British motorists let their insurance policies automatically renew each year.
Auto Renewal: Good or Bad?
At first glance, that your car insurance policy rolls over every year, without any input or paperwork on your behalf, and without even a voyage through a helpline phone menu, is a relief. And there’s more logic to the automatic renewal of car insurance than for other insurance policies. If your home insurance policy lapses, although you may sorely regret not renewing it or seeking out a new policy if your home catches fire or a pipe bursts, you won’t fall afoul of the law.
But it’s a legal requirement to have at the minimum third party insurance for any vehicle using or even parked on public roads in the UK. If you’re caught driving without insurance, even if it’s simply because your policy expired last week and you weren’t on top of it, you’re guilty of an offence known as IN10.
With an IN10 you could face a fixed penalty of £300 and accrue 6 points on your penalty licence. If your case is taken to court, you could be banned from driving and/or subject to an unlimited fine. And because an IN10 is a motoring offence, it will impact your ability to obtain cheap insurance in the future.
Insurers use Continuous Insurance Enforcement legislation and the risks of driving uninsured to justify the automatic renewal clauses present most car insurance polices on the market—but it also benefits them financially to have you locked into another year’s contract, at a price you didn’t negotiate.
Let’s be clear: you need to have car insurance and if you’re terminally forgetful, auto-renewal might be a good safety net. But for everyone else, you should avoid auto-renewal of your car insurance, which will see you locked into another 12 months of the same policy, often at a higher rate than you initially paid.
Your Rights Regarding Auto Renewal
A simple Google search about the automatic renewal of auto insurance policies turns up hundreds of customers of outraged that such a practice is even legal and wondering how they can exit their automatically renewed policies without incurring cancellation charges. The Financial Ombudsman Service (FOS), which deals with complaints about the insurance industry, says auto renewal is involved in 5% of the car insurance cases it handles.
Auto-renewal of your insurance policy is legal for the insurer, but as a consumer, you’re also guaranteed certain rights and if your insurer fails to protect these rights, specifically by providing you with adequate and timely information about auto-renewal, you might be able to exit your contract without penalty.
Insurance companies must inform you when you purchase a policy that it will automatically renew. They must be upfront with this information and not conceal it in the fine print of the terms and conditions. Some insurers will give you the option of checking a box to confirm you’d like the policy to automatically renew after a year. Watch out for this in the policy paperwork, as your check mark, even in a long list of check marks, implies your knowledge and consent.
The insurance provider is also bound to contract you 30 days before your 12-month contract is due to end to inform you they will be renewing it for another year unless you instruct them not to do so. If they don’t notify you within this time period, you may be able to cancel the policy without incurring cancellation charges. Additionally, if you find your policy has renewed, you may be able to take advantage of the standard 14-day cooling off period to cancel the contract. In these cases, you may be spared a cancellation charge, but you might be charged for the 14 days of cover you did receive.