Saturday 1 October 2016

Don't be a mug and just settle for the first insurance quote that you're given

Our Personal Finance Editor on how to curb spiralling cost of car cover

Published 20/01/2016 | 02:30

Manufacturers not fitting vanity mirrors is one gripe.
Manufacturers not fitting vanity mirrors is one gripe.

Motor insurance premiums have gone up far more than any other good or service in this country. Official figures show the cost of premiums rose by 26pc in the last 12 months.

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But many of the State's two million drivers are being hit with far higher hikes.

More than one-third of motorists have watched as the cost of their insurance rose by up to 50pc this year, an AA survey found. This has prompted thousands of drivers to reduce their levels of insurance cover in an attempt to manage costs, the AA says.

A rise of that magnitude means someone paying €500 last year is now being quoted €750.

And the motoring body warned that premiums for the State's two million drivers are set to continue to rise into this year unless major reforms are put in place by insurers and the Government.

An AA motor insurance survey of more than 5,000 motorists reveals that 34pc have had their premiums rise by between 20pc and 50pc when compared with 2014.

Another third said they are forking out up to an extra 20pc this year.

A quarter of policyholders saw no change in their premiums. A tiny minority of just 5pc enjoyed a cost reduction.

Chief executive of AA Ireland, Brendan Nevin said ordinary drivers are being asked to carry an unacceptable burden.

Insurers are losing money so they are attempting to play it safe and ditch high-risk drivers, such as those under 30. For the rest, they are imposing huge increases in the cost of policies.

There are many reasons for the general surge in the cost of car cover.

They include bad decisions made by insurers, poor regulation, more claims, high and rising legal costs, and fraudulent personal injuries court cases.

Unfortunately the honest driver is picking up the tab for this, effectively bailing out insurers for bad decisions and the paying the cost of regulatory failures.

All drivers are already paying a 2pc levy on their policies for the failures of the Quinn Insurance group.

Six years later drivers are again paying up for the bad decisions of others. Motor insurers are losing money because they made bad decisions about pricing and the level of reserves they have put aside for claims.

Drivers need to ensure they do not just renew their policy at an inflated price without fully checking out if they can get a better deal.

It is worth keeping in mind that your renewal quote is a big try-on, insurance experts warn.

Insurers are playing a percentage game. They push up the new quotation beyond what they need to charge.

They know the savvy drivers will challenge the new premium they are expected to pay and get a better deal by going to another insurer, or forcing their existing company to match a better offer they got elsewhere.

But they also know that a small percentage will accept the inflated new premium and just pay it.

The advice is: don't be one of those mugs.

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.

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 over-value their car. Check car 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 - for vehicle registration tax purposes.

And be careful about excesses. This is the amount you have to pay yourself before you can make a claim. Lately, insurers are imposing higher and higher excesses.

This reduces the risks for them, but means you end up not claiming for small accidents. Excesses of €500 are not uncommon these days, but when they get to that level they rather negate the value of having insurance - though of course you are legally obliged to have it.

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.

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.

Pay for your cover annually if you can afford to. Paying 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.

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.

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