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Sunday 23 October 2016

What to do to curb spiralling car cover costs

* Our Personal Finance Editor Charlie Weston says that, despite the surge in insurance premiums, there are ways to trim your bills

Published 18/11/2015 | 02:30

Premiums are up 35pc since January 2014.
Premiums are up 35pc since January 2014.

Motor insurance premiums are shooting up - in a development that is leaving drivers shocked and sucking money out of their pockets.

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Some of the nation's two million drivers are getting renewal notices with premium increases of up to 50pc more than they paid last year.

According to calculations by AA Ireland, the average premium is now up 35pc since January 2014.

This means car cover that cost €600 in 2013 is now €210 dearer.

Young drivers, in particular, are being asked for €3,000 - even €4,000 - when they had to pay €2,500 last year.

Insurers are losing money so they are attempting to play it safe and ditch high-risk drivers, like those under the age of 30.

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 claims.

Nowhere in that list of culprits is the honest driver, who has ended up baling out the insurers for their bad decisions, and the regulatory failures.

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. Don't be one of those mugs, is the advice.

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.

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.

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 to your car, 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 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.

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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