Auto-renewing your car insurance seems like an obvious and easy option. Why waste time looking for a new deal, when you’re happy with your current policy and provider? Sadly life (and insurance) aren’t that simple. Even following new rules that ban insurers charging existing customers more than new ones, your loyalty could still cost you a pretty penny. Here’s why.
Auto-renewal is where, if you don’t take any action, your existing car insurance provider rolls your policy over when your previous term (usually 12 months) comes to an end. If your insurer auto-renews your cover then, unless you do something about it, you’ll be covered under the same terms as before for another year. Auto-renewal has pros and cons, which we’ll delve into later.
It depends on the specific insurer and your agreement with it. When you first take out an insurance policy, some insurers will give you an up-front choice of whether or not you want it to auto-renew. Others will set your policy to auto-renew by default and you’ll have to contact them if you want to turn it off.
Insurers have to tell you they will automatically renew your deal. This is likely to be either by getting you to tick a box when you sign up, or by explicitly telling you it will do this at the end of the year. If you can’t remember what it said when you signed up, check your terms and conditions or contact the insurer directly to ask. Assuming your cover will auto-renew (or assuming it won’t) both come with a risk if you’re wrong.
Yes. Provided they tell you (and that you are given the ability to stop the auto-renewal if you wish), then it is legal for car insurers to set up your policy to auto-renew. However, they must contact you in advance of your renewal date to let you know when the renewal will take place and how much your renewed policy will cost, so that you have a chance to cancel if you wish.
Your options for stopping your car insurance from auto-renewing depend on your provider, as policies vary. In some cases, you’ll have a choice when you take out a policy of whether to auto-renew or not. In other cases, it’ll be the default and you’ll have to opt out subsequently. Some insurers may let you do this in your online account, if you have one. With others you’ll have to call to request it.
Bear in mind that if you cancel auto-renewal, the onus is on you to remember to buy a new policy to start when your existing policy expires. Otherwise you risk driving uninsured, which is illegal. Even if you aren’t set to auto-renew, your existing insurer should send you a letter or email when your current policy is a few weeks from expiring, letting you know what it can offer you. But it’s safest to put a reminder in your diary too.
Yes. Every time a car insurance policy starts or renews, you have a 14-day cooling-off period to change your mind. Provided you haven’t claimed during this period, you’ll get back the cost of your policy minus any days it was active for. Some insurers may also charge a cancellation admin fee. This is likely to be lower than if you cancel after the 14-day cooling off period though. And some insurers don’t charge cancellation fees at all during this period.
That’s a call only you can make. There are pros and cons to turning off car insurance auto-renewal. Some depend on how on-the-ball you think you’ll be when your existing cover runs out.
There are two main risks of auto-renewing, particularly if you didn’t know it was going to happen.
The key risk of turning off auto-renewal is that of driving uninsured. Driving without insurance is illegal and can come with some hefty penalties. So, turning off auto-renewal and forgetting to buy a new policy when your existing one expires could cost you dear. Auto-renewal has downsides, but it does provide a safety net that you will always be covered if you’re absent-minded. Or if life gets in the way of boring insurance admin.
If you’d asked us this a few years ago, the answer would have been a disappointing yes. Until 2021, it was a sad reality in the insurance industry that not only did loyalty not pay, but it could actually have cost you even more dearly than it can now. Stories were rampant of customers who’d stuck with their existing provider for years being charged, in some cases, hundreds of pounds more than they would have if they’d taken out a policy as a new customer. It was intended as a competitive practice by insurers to lure more proactive drivers away from their existing provider. But this came at the cost of those who lacked time, ability or inclination to shop around. It doesn’t seem quite fair, does it?
Fortunately, after a market study, the UK’s financial regulator – the FCA – agreed. From January 2022 it banned the practice of making renewal quotes for motor insurance consumers more expensive than they would be for new customers. The same rules apply to home insurance. This means that you shouldn’t pay any more if your insurance auto-renews than you would do if you took out the exact same policy as a new customer.
Buyer (or rather auto-renewer) beware though. Your existing insurer may not be allowed to charge any more than they would if you were a new customer. But this doesn’t mean your insurance premiums won’t rise. Or, even if they don’t, that you won’t now be able to get equivalent cover even cheaper from another provider. The insurance loyalty penalty might have been done away with. But it’s still well worth shopping around every year to find the best car insurance deal.
The Association of British Insurers (ABI) publishes a regular tracker looking at how the cost of insurance is changing. In its report from the second quarter of 2022, it revealed that costs for both new policies and renewals had increased a little on the previous quarter.
Quarter on quarter, average renewal premiums had risen just 0.5% (to £371), while average premiums for new policies rose by 3% (to £500). There will be some nuances behind this, of course. The new policy figures will include those taking out insurance for the very first time, with no track record and no claims history. And such customers tend to be more expensive to insurer in general. By definition, those renewing their car insurance will almost certainly have at least a year’s worth of driving history, so are more of a known entity.
But, while it’s early days, these findings paint a promising early picture of the effect of the ban on loyalty premium hikes.
| Response | Male | Female |
|---|---|---|
| £50-99 | 21.2% | 16.27% |
| £25-49 | 20.38% | 15.21% |
| £100-£199 | 16.3% | 14.01% |
| Not sure | 7.88% | 11.45% |
| £1-£24 | 8.97% | 9.79% |
| N/A there is no price hike that would stop me letting my car insurance auto-renew | 6.52% | 3.92% |
| £200 or more, please specify | 0.54% | 1.05% |
You might assume that the precise timing of when you get quotes to renew your car insurance doesn’t really matter. But many sources suggest that shopping around (and buying) 2-4 weeks before your renewal date will get you cheaper premiums than if you leave it until the last minute. The exact reasons for this are as mysterious as most workings of the car insurance industry. Perhaps insurers know that they have to be more competitive for those that still have the leisure to look elsewhere rather than those that are running out of time.
Either way, pop a note in your diary to get searching a few weeks in advance of your renewal date. Or, if you forget to do this, your reminder letter from your existing insurance should hit your doorstep or email inbox around this time. You can typically set the start date for your insurance for up to a month later than you buy it, so you don’t need to worry about doubling up.
Allowing your car insurance to auto-renew is an easy option. Plus, it avoids the risk of you missing your renewal date and driving without insurance. But, for most people, shopping around each time their existing policy expires is likely to get them a better deal. Your insurer has to let you know when you take out the policy if it will auto-renew. Some will give you the choice. If you unintentionally allow your policy to auto-renew, you have a 14-day cooling off period to change your mind and cancel. There may be an admin fee, but it could be worth paying if you find equivalent cover at a much lower price.
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