Every year, most of us receive a letter from our car insurer which contains our renewal certificate. It’s a fairly innocuous document which informs you that your insurance policy is being renewed for yet another 12 months. The certificate details your new annual premium, reiterates your level of cover and any other features (if applicable).
And yet, fewer Australians were expected to automatically renew their policy in 2014 than the year before – according to Roy Morgan Research. Is loyalty falling out of favour?
We’re of the opinion that you should always be hungry for better value, which means you should always ask the question, “Why should I remain loyal this year?”
Loyalty can cost you real money
Roy Morgan stated that more than three quarters of surveyed Aussie drivers automatically renewed their car insurance policies in 2014. Additionally, Australians on average paid increasingly more expensive premiums every year from 2004 to 2013, according to the Insurance Council of Australia.
That means that every year, many drivers are automatically rolling over their insurance policies without question even though premiums are more expensive now than they were five years ago, according to the Insurance Council of Australia.
See more of this data here. Please note the above doesn’t detail dollar amounts. According to the ICA, “They represent the percentage change in the index numbers between two consecutive or distant quarters” – i.e. relative difference between premiums year on year.
So, what does loyalty cost drivers? Perhaps nothing. You may have been with one particular insurer for years because they’ve continually been the best around. Or, maybe you’ve simply failed to look at other options. The fact of the matter is that your premiums are unlikely to ever drop on their own. Sure, discounts can be applied, but your base premium will likely stay the same, or become more expensive.
There are a number of ways car insurers keep us customers locked in. Let’s look at some of the more popular ones.
Trap #1: Ease of rollover
We think the greatest weapon in the arsenal of car insurers is a complacent shopper. If you don’t look at what you’ve been paying this year, and let your policy renewal proceed without question, you’re possibly giving insurers free reign to set the prices. Happily, it’s easy to pull out last year’s renewal letter and compare the old price alongside the new. If it has gone up, call your insurer and ask why – or better yet, get a better deal by shopping around on our website.
Trap #2: Loyalty programs
Rating ones, no claims discounts, and loyalty programs; are they really worth it, and does it save real dollars from the hip pocket?
Some insurers will offer you a percentage discount on your premium, depending on how long you’ve been with them. These represent an excellent opportunity to save long term, and you could even consider having a slightly more expensive policy in the first year if it means a less expensive one next year. Whatever you choose to do, just make sure you run the numbers and you’re happy with what you’re paying.
You can also enjoy a discount for signing up online (with certain insurers). While this ‘falls away’ at the time of renewal, it can mean savings when choosing a new car insurance policy.
Trap #3: Extra features
Free roadside assistance, hire cars if your vehicle is stolen – there’s plenty of incentives for signing up to a policy in the beginning. While these features are attractive on paper, perhaps roadside assistance costs little to take out separately, or your family is happy to lend you a car while yours is in the shop. Separate your ‘needs’ and ‘wants’, and you’ll find a more worthwhile policy in the long run.
Trap #4: You have a bad claim experience
The Financial Ombudsman Service recorded 6,401 disputes in 2014/15 regarding domestic insurance products. Of those, 38% were related to comprehensive motor vehicle insurance – roughly 2,432. That’s 7 cases per day of Australians complaining about their car insurance, which may not seem like much.
However, that’s 7 Aussies who were dissatisfied enough to complain to the FOS about their insurer. Are all these Australians now with a new insurer? Maybe not. If the service hasn’t been up to scratch, don’t hesitate to compare other options.
Trap #5: The insurer is doing a great job
It’s easy to ‘write off’ an insurer who’s performed poorly in customer service. It’s much harder to criticise an insurer who – by and large – has been doing an excellent job. But, even if your insurer has,
- great customer service,
- exhaustive coverage, and
- the cheapest price you could find at the time,
…you could still save, or find better value. Don’t let loyalty get in the way of finding the best deal around. Use our car insurance comparison tool to see if you can find a policy that is better suited to you.