12 ways to curb the spiralling cost of your car insurance
Our finance expert offers some tips to help save you money, time and hassle as premium increases continue to hit motorists hard
Motor insurance premiums have shot up massively. The average rise over the last three years has been 70pc, but many drivers are being asked to pay larger increases.
The collapse of Quinn Insurance, Setanta, Enterprise and the precarious funding position of RSA and FBD have meant insurers have reacted by heaping on the price pressure on more than two million drivers.
Average premiums are now close to €900, according to market research company Consumer Intelligence.
Dublin motorists are paying even more.
Despite a clean licence, no penalty points and no claims, premium hikes of €300 are common.
Some people are being hit by higher increases, especially if they have a claim on their policy, are a young driver, or have penalty points.
There have been claims that the average cost of premiums could hit €1,000.
* Many culprits
There is a complex range of reasons for these premiums increases. They include loss-making in the insurance sector due to under-pricing in the past, as companies cut prices to try to win market share.
The industry is also suffering from investment losses being made by insurers. In the past insurers could deal with losses on their books by investing and making a return on premium income. Low interest rates mean this is no longer possible.
Insurers have also failed to put sufficient funds into their reserves to meet rising levels of claims. Rising values and more frequent claims are a real problem, while fraudulent and exaggerated claims are an ongoing issue.
New regulatory rules and changes to the courts system have also hit insures.
All of this means insurance companies are effectively asking drivers to bail them out for their poor management decisions and losses.
However, the good news is that there are at least a large number of motor insurers active in the market, while credit unions are now involved in reselling motor cover at good rates.
Not all insurers are making losses. Aviva is managing to buck the trend. All this means that shopping around is more important than ever.
How to fix it
Here are some ways to fight back:
If you are claims-free, it makes sense to regularly switch insurer. Compare rates from different insurance companies by ringing them or going online. It is worthwhile using a broker. It won't cost you any more than going directly to the insurer as the broker is paid by the company. You may be entitled to a discount if you have more than one type of insurance policy with the same company. Ask also if there are other discounts you might be able to get.
* Don't over insure
Other tips to keep the costs down include being conservative with the car's value. This is important as you can only claim what the vehicle is deemed to be worth by the insurance company's assessor.
People often overvalue their car. Check sales adverts to get a good market indicator of your motor's value.
Alternatively, the Revenue Commissioners website has a valuation tool for each model and year of manufacture, put in place for vehicle registration tax purposes.
* Check the excess
Be careful about excesses. This is the amount you have to pay before you can make a claim. Lately, insurers are imposing higher excesses. This reduces the risks for them, but means you end up not claiming for small accidents. Excesses of €500 are not uncommon, but when they get to that level, they rather negate the value of having insurance.
* Get a discount by using telematics
Telematics is a way of monitoring the location, movements, status and behaviour of a vehicle. You can do it through a smartphone. Insurer AIG offers discounts of up to 20pc for using an app that monitors driving style.
AIG says it aims to reward better driving behaviour with potential savings of up to 25pc in discounts.
Someone who drives smoothly and anticipates traffic flows should achieve a good score.
AIG says XLNTdriver is the first driving app on the market with an auto start/stop functionality, which means that users do not have to stop and start the app each time they wish to make a journey.
* Men, get insured with Its4women
Online insurer Its4women markets its motor insurance at females but the law means it cannot refuse to cover men.
Because most of its customers are women, who are safer drivers and have fewer claims, it tends to be more competitive than motor cover sold equally to both sexes.
A recent European Union gender directive, which became law in this country, means men and women can't be discriminated against in terms of the price of insurance.
Dublin student Shane Spain was able to reduce the cost of his cover from €810 to €500 by opting for Its4Women.
* Take out two-year cover
The cost of motor premiums are predicted to keep rising this year.
To ensure you pay the same this year as next, you could opt for two-year cover which is offered on motor insurance by Blue Insurance.
This means that the premium you pay this year will be the same again next year. And if you have an accident in the two-year period, your premium will not rise.
The motor insurance product is underwritten by UK business Zenith Insurance.
* Don't modify
Avoid modifying your car, unless you are increasing its safety. Even a small modification, such as new alloys, can cause your premiums to shoot up.
Any changes should be discussed with your insurer first. However, any modification that increases safety - such as installing an alarm, or immobiliser - can help you cut costs.
* Small engine
Choose your car wisely. The more expensive your car and the bigger its engine, the more you are likely to pay. You may also have to pay more if your car is imported or if there are more theft claims on your model of car. Check with your insurer before you buy a car, so you can estimate insurance costs.
* Pay annually
Pay for your cover annually if you can afford to do this. Paying for cover on a monthly basis is the same as taking a high-interest loan from your provider, with the interest as high as 20pc imposed on top of the premium for paying by instalments.
* The savings explained
If you have an accident, and there is no-one else involved, it makes sense to consider paying the cost of the repairs yourself. This way you will avoid losing your no-claims discount, which may entitle you to a discount of between 50pc and 75pc, depending on the insurer.
If you lose your no-claims discount you will have to rebuild it from scratch, something that could be mostly costly than paying for the cost of the repairs.
Also worth noting is that having more than one policy with the same insurance policy will likely get you a discount. This means you may need to make your insurer aware of what policies you have, as they make not be aware that you have more than one policy.
Liberty and Axa offer discounts of 10pc off the cost of insuring second cars, or if you also take out home insurance. Aviva gives a 25pc discount on premiums for second cars.
Young drivers can cut the cost of premiums by between 25pc and 30pc by passing their driving test.
Completing an insurer's driving course can mean further discounts. Young drivers can also cut the cost of cover by adding their parents to their cover.
* Some things to watch out for
The job categories that insurers use to price your cover can be broad and many motorists could save money by describing their occupation differently. For example, describing yourself as a housewife or a house-husband instead of being unemployed can help reduce your premium. It's worth experimenting to see if a different job title affects your premium, but you should never lie about your job. Don't say you're a butcher if you're a baker. This is considered fraud and you could be prosecuted.