Car insurance costs are often inflated by hidden catches. Here are some of the tricks to watch for
8:38AM BST 15 Sep 2014
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Motor insurers are still tricking customers out of extra cash by shoehorning them into costlier policies, burying fees and charges in small print and automatically adding unwanted extras.
Research by consumer group Fairer Finance found poor practice was still rife in the sector. A third of insurers still arrange pay-monthly policies for customers who have come from comparison websites when they have specifically asked to pay annually.
Firms charge more when premiums are paid over 12 months rather than annually in a lump sum. Customers who do not carefully check that their selections have been retained are likely to end up paying significantly more for their cover.
Worryingly, a number of insurers such as AA and Allianz are still automatically signing customers up for highly profitable "add-on" products that are not clearly disclosed or explained.
Add-ons are insurance products sold alongside the primary policy. Some motor insurers are believed to generate a third of their profits from add-ons alone.
In July, the City regulator, the Financial Conduct Authority (FCA), said add-ons offered poor value for money. It warned that customers were being overcharged by up to £200m a year for these options and said it planned to ban insurers from automatically selling add-ons.
The AA still opts customers into six months worth of free home emergency cover, which it then starts charging for on an annual basis.
James Daley, managing director of Fairer Finance, said the AA appeared to deliberately set the policy up so it runs on a different time frame to the car insurance. Customers must remember to cancel the free cover before it converts to an annual policy.
"It runs out of sync with the car insurance policy so that they don't come up for renewal at the same time," he said. "The AA also doesn't even tell customers at the point of purchase how much the home emergency cover will cost when the six months are up."
An AA spokesman said the insurer was in the process of removing the home emergency cover add-on. "AA Home Emergency is a very good product that we think customers appreciate, but the AA is keen to be transparent," he said. "In any case, home emergency cover, under the banner of AA Home Membership, is a popular choice for customers if it is offered on its merits without the free six-month automatic opt-in."
Allianz automatically opts customers into windscreen cover, forcing those who don't want it to remove it manually.
Jon Lott of Allianz said: "At the point of quote we do include windscreen cover as a standard as it is highly popular with our customers, and its cost is included in the price shown on aggregators [comparison sites]. However, it can easily be removed."
The research found that three quarters of insurers were failing to disclose their fees and charges properly – with most burying them in their small print. And more than a third of firms didn't include them in their policy document, instead pointing customers to supplementary paperwork.
To make matters worse, the average length of policy documents has gone up over the past six months from 18,000 words in March to around 18,400. Of the 44 car insurers in the market, Fairer Finance said only two used plain English in their policies.
A spokesman for the Association of British Insurers said policy documents were evidence of a legal contract and had to set out in full all details of the contract.
"That said, policy documents should be designed and written to make it as easy as possible for customers to understand the cover they have bought," he said. "In many cases cover has widened in recent years and this may be reflected in the size of policy documents."
Mr Daley said most insurers could still do more to ensure customers understood the products they were buying.
"Fees and charges are often hidden away and policy documents are generally far too long for customers to realistically tackle," he said. "In the long run, it's in insurers' interest to ensure that their clients understand what they're buying. But too many insurers find it too hard to resist the opportunity to try to make a quick extra buck."
FairerFinance.com will publish its full rankings, based on customer happiness and trust along with how good companies are at handling complaints and how transparent they are, this week.
Top 10 car insurers
| Insurer | Fairer Finance score |
|---|---|
| CSIS | 99pc |
| Nationwide Building Society | 99pc |
| NFU Mutual | 98pc |
| LV= | 98pc |
| John Lewis Insurance | 94pc |
| Saga | 88pc |
| AgeUK | 87pc |
| Sainsbury's Bank | 83pc |
| Allianz | 73pc |
| MORE TH>N | 62pc |
Source: Fairer Finance
Worst 10 car insurers
| Insurer | Fairer Finance score |
|---|---|
| AXA | 23pc |
| Privilege | 18pc |
| Hastings Direct | 18pc |
| AA | 18pc |
| Diamond | 18pc |
| Kwik-Fit Insurance | 15pc |
| One call | 12pc |
| Lloyds Bank | 12pc |
| Post Office Ltd | 6pc |
| 1st Central | 6pc |
Source: Fairer Finance
The trick to getting the cheapest car insurance
Getting the cheapest car insurance is, sadly, not as simple as just using a price comparison service. These websites - try Moneysupermarket's quote finder - provide an excellent starting point. But some major insurers only deal with customers direct. These include Aviva, Direct Line and Zurich.
Some also offer special offers that are worth factoring in:
- John Lewis Car Insurance are giving away a Golf Match with a year's free insurance if you buy a policy before the 31st October 2014. Prize draw terms and conditions apply. Click here
- For the over 50's, the Post Office will guarantee to beat your renewal premium by £50. Click here
- Exclusive: the Telegraph has negotiated a special deal with Aviva. You get £60 of Amazon vouchers if you take a policy using the voucher code: TELEGRAPH60. Click here
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