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Friday 28 July 2017

Top five tips to help save you hundreds on your car insurance

Your premium could be significantly lower if you deal with insurers directly, writes Louise McBride

Louise McBride

Louise McBride

My car insurance renewal quote came through the door a few weeks ago - and, like so many other drivers, I was facing a double-digit price increase. I paid €389 for my car insurance last year. This year, I was quoted €489 - 26pc more.

Neither my husband (who is insured as a named driver on my policy) nor I have done anything over the last year to warrant such a price increase. We both have a no-claims bonus of more than 10 years. We have no penalty points or driving convictions. We drive a run-of-the-mill family car. Yet my insurer asks me to pay 26pc more.

It was a similar situation last year: my car insurance renewal quote in February 2016 was 21pc higher than it was in 2015.

At €489, I know my bill is a fraction of that of many other drivers. A lot of young drivers are struggling with car insurance bills running into a few thousand euro a year.

Still, price rises like this are simply not sustainable for me. These hikes also worry me. I live in rural Wicklow. It's about an hour's walk to my nearest village. Like so many country dwellers, I rely on my car to get around - and to ferry my three young children everywhere. Public transport links here are woeful. Should I be hit with a double-digit price increase every year, there could soon come a day when I simply cannot afford my car insurance.

So I decided to contact some brokers. Surely they would get me a better quote. Yet the quotes I got from brokers for the exact same cover were up to €300 more expensive than the quote from my current insurer.

The renewal quote from my insurer was €489. The best I could get from the first broker I contacted was €615. From the second, it was €594. The third broker I tried gave me a best figure of €796 - €307 more than my insurer's quote. At that point, I gave up on the brokers. I figured I had no choice but to swallow the 26pc price increase.

I rang my insurer and asked if €489 was the best price it would give me - pointing out that I had a no-claims bonus of more than 10 years. At that stage, my insurer brought down my quote to €432 and I renewed at that price. So I paid 11pc more for my car insurance than I did last year - still a sizeable price increase but thankfully lower than the 26pc hike I initially faced. That €432 was also a lot less than what the brokers were quoting.

Many people contact brokers in the belief they can scour the market to get the best deal - and that's certainly what brokers say they can do for you. Yet, in my experience, I could have paid hundreds of euro more for my car insurance had I gone through a broker instead of dealing with my insurer directly.

Read more: Motor insurers accused of 'hardening their attitude' towards drivers rather than easing up on premiums

"Sometimes going direct to an insurer can be cheaper but in many cases motorists will get a lower price by going through a broker - particularly where they don't perfectly match the big insurance companies' target customers of Mr and Mrs, 40-year-olds, with full no-claims bonuses, no penalty points and driving a VW Golf," said Brian McNelis, director with the Irish Brokers Association (IBA).

"A huge proportion of motorists will end up paying more if they don't ask a broker to price their insurance for them. Also, should you need to make a claim, you need an independent person such as your broker to advise you on what you're entitled to. Relying on an insurer to show you the small print that could make a big difference in the outcome of your claim seems somewhat illogical."

McNelis, however, also said there is fierce price competition in the direct-insurance market (where consumers buy their insurance directly from an insurer instead of from a broker). "It can be hard for brokers to compete with direct Irish insurers [on price] - unless they go outside the country to a non-direct insurer," said McNelis.

Commissions also come into play. Car-insurance brokers typically earn commissions of between 5pc and 10pc, according to the IBA. A discussion paper published by the Central Bank last June found that motor insurance brokers typically earn between 7.5pc and 10pc commission. Furthermore, "better rates of commission have been negotiated individually by some brokers and the Central Bank also observed some profit-share arrangements between general insurers and some larger intermediaries", said the paper.

It is always worth contacting different insurers and brokers to see if you can get a better deal on your car insurance - particularly if you're facing a steep price increase. Be sure to highlight your claims-free history (if you have one) when shopping around - some insurers offer a bigger no-claims bonus than five years so you may get a better discount if you have not made a claim for the last seven or more years.

However, if, like me, you cannot get a better price when shopping around and you are struggling to afford your renewal premium with your current insurer, here are some steps you could take.

Read more: Banks and insurers warned over use of tracking devices on customers' cars

1. Get all the discounts you are entitled to

Some insurers offer multi-car discounts of as much as 25pc if a family has insured two or more cars with it. This discount does not usually kick in automatically - you need to ask your insurer if you're eligible. You may also be entitled to a further discount if you have another insurance policy (such as home insurance) with the same insurer. Check too that you're getting the full no-claims bonus discount that you qualify for.

2: Downgrade to third party, fire and theft cover

Many people choose comprehensive cover when buying car insurance. Opting for third party, fire and theft cover instead could save you several hundred euro a year - depending on your insurer and age.

A 20-year-old driver of a Chevrolet Kalos could save almost €800 - or about a quarter of their premium - by opting for third party, fire and theft cover instead of comprehensive, according to the Competition and Consumer Protection Commission's most recent car insurance survey. A 38-year-old dentist, however, could save as little as €32 - or 9pc - by downgrading, the same survey found.

You will lose valuable benefits if downgrading from comprehensive insurance, so only consider doing so if the savings will be substantial and you are happy with the drop in cover. Third party is the minimum cover you are required to have by law.

3: Give up the add-ons

You could knock €100 or more off the price of your car insurance by giving up a few of the typical add-ons in policies, such as windscreen cover, breakdown assistance or no-claims bonus protection (an insurance policy that ensures your premium won't go up the following year should you make a claim). Be careful about giving benefits up, however, because add-ons could save you a few hundred euro if you ever need them. Windscreen cover might add as little as €17 to the cost of your policy - but it could cost a few hundred euro to get a new windscreen. Breakdown assistance cover might add about €40 to the cost of your policy but it could cost more than €100 to get a call-out and repair job should your car break down.

4: Pay a higher excess

Opting for a higher excess (the first part of a claim you pay yourself) could save you some money - but only consider a higher excess if the savings will be substantial. Doubling your excess from €250 to €500 might only save you €10 on your car insurance - and the higher excess would leave you substantially out of pocket should you then make a claim.

5: Pay up front

You could pay as much as 30pc more by paying your premium in monthly instalments instead of up front. Had I paid my premium in instalments instead of up front, my bill would have been €150 higher this year. Some insurers have a lighter loading of around 8pc for those who pay in instalments but you will still save money if you pay up front.

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