Driving down costs of car insurance

Annabel Palmer on how customers could cut down their hefty London insurance premiums

THE AA recently announced that comprehensive car insurance premiums saw their biggest fall since the motoring organisation’s records began in 1994. The average annual quote declined to £594.86 by the second quarter of this year, a 9.8 per cent drop from July 2012. And London experienced the second biggest regional fall in the second quarter – by 3.5 per cent to £688.73.

It’s welcome news, and largely driven by recent government attempts to crack down on referral fees and rogue “no win, no fee” companies. But as Simon Douglas of the AA says, the cost of car insurance is still around double what it was six years ago. So what can you do to reduce your premium further?

There were 89,431 recorded motor vehicle crimes in London in 2012-13. The figure is down 9 per cent on the previous year, but insurers will nonetheless charge less if they know you have immobilisers and alarms installed. And a tracking device, activated in the event of a theft, could be another option to consider.

But Mike Brockman of Insure the Box says buying an “old banger” won’t necessarily mean cheaper insurance. “The largest claims in insurance involve injuries, so drivers are better off with a car with good safety features.” Insurers will offer discounts to owners of safe cars, meaning you can recoup some – if not all – of your initial investment over time. There are also ways of finding out how your car model will be viewed. Websites like www.parkers.co.uk will tell you which insurance category your car falls into, for instance.

Another important factor deciding your premium is where you park at night. Renting off-road parking may sound expensive – especially in London – but it could shave up to 10 per cent off your total cost.

Every year, many drivers receive a letter from their insurer informing them that their policy will be automatically renewed unless they call and cancel it. This new cover, however, can come at a higher price and sometimes with a renewal fee. Figures from MoneySuperMarket show 40 per cent of customers could save as much as £311 on the cost of their policy simply by changing provider. Loyalty isn’t rewarded.

And innovation is offering customers the opportunity to reduce their premiums further – assuming your insurer believes you to be a “safe driver”. The British Insurance Brokers’ Association found that telematics – where a black box is installed in your car, monitors your driving, with providers then adjusting your premium accordingly – reduces costs by a quarter on average.

Telematics currently accounts for only 1 per cent of the total UK car insurance market, but its market share is forecast to grow rapidly. And Brockman estimates that up 5 per cent of young (17 to 25) drivers already have insurance incorporating telematics – as traditional policies frequently leave them with higher premiums based on their age, rather than their skills behind the wheel.

At Insure the Box – where drivers buy a bulk of either 6,000 or 8,000 insurance miles – 95 per cent of young drivers (under-25) were offered reductions averaging 23 per cent in their first year. Its sister brand, Drive like a Girl, is trying to overcome the effects of new EU rules that make gender-neutral pricing compulsory for motor insurers. It, too, uses a box, but mileage is unlimited.

Aviva’s Drive smartphone app, meanwhile, offers a discount on insurance policies of up to 20 per cent. And Co-op young driver insurance had an average premium for 17 to 22 years olds that was £300 less than those without telematics.

Of course, not everyone wants their driving monitored, especially if they have a more carefree approach to driving. “And a black box will penalise those driving between 11pm and 6am. Some companies will also charge to install the box, and remove it when you come to selling your vehicle,” says Anthony Forchione of MoneySavingExpert. But on the other hand, if enough safe drivers sign up to telematics, you could be left with a more expensive policy simply from opting out.

The most important rule, however, is to shop around. “Believe it or not, our motor insurance industry is one of the most competitive in the world,” says Brockman. “The UK is one of few countries with price comparison sites, giving customers huge power to find a good deal.” But while insurance companies have to guarantee that they will offer the same rate as cited on these sites, there can be discrepancies, so you should always cross-reference. It is also worth consulting insurers – like Direct Line – that don’t list through comparison sites.