Motorists on the hunt for more affordable car insurance are being warned to watch out for a marketing trick that makes deals look cheaper than they are.
With the cost of cover having soared over the last year or so, insurers have been accused of charging excessive excesses in a bid to propel their quotes to the top of the rankings on price comparison sites.
A steep excess brings down the headline cost of a policy, but can leave drivers owing more than they can afford in the event of an accident.
When getting quotes, you are able to tweak your voluntary excess. Generally, the higher it is, the lower your premium.
Over the past year it has become easier to push a voluntary excess higher, according to data company Defaqto, which found that insurers varied their range anywhere from £100 to as much as £3,000.
One reader, who recently logged on to a price comparison site to look for a new deal after her car insurance renewal rose to £1,000 from £600 last year, “found lots of policies between £600 and £750”.
But, she says: “I then noticed the excess on each of was £400, plus a £250 voluntary excess. When I took off the voluntary excess, the price leapt up. But to get the £400 down, I’d need to pay £3,000 for my cover.”
Henry Pryor, a property buying agent who lives on a farm in Hertfordshire, had a similar experience. He has been with the same insurer for years. “I have a three-year-old hybrid Range Rover. Last year my premium was £869. This year the original quote was £1,296.”
An eye-watering price, he says, for a “very boring driver” with no recent claims, no points and 20 years of no-claims discount. “I live in the country and I’m old.”
He says he has tried elsewhere “but all companies were quoting similar amounts”. Pryor decided to stay with the same insurer and lower his premium to £1,031 but, in order to do so, he had to increase his excess to £850.
“Sometimes a good price can be explained on closer inspection by a steep excess,” says Sam Richardson, deputy editor of Which? Money.
“Many insurers also include a compulsory excess, too. Check that you’re taking both this, and the voluntary excess, into account when you’re deciding on the deal. Any saving you make because of a particularly high excess might have to be repaid several times over if you later claim.”
The impact of excesses is still not well understood by the majority of drivers, research by comparison site Go.Compare has found.
Only just under half of those surveyed said they could fully explain what “voluntary” and “compulsory” excess meant in relation to their policies.
Only a third said that they expected to pay an excess at all. Many did not realise that both excesses would be added together, and had a “nasty shock”, or would not be able to afford to pay them when confronted with a bill.
Tom Banks, car insurance expert at Go.Compare, says: “Our research revealed that if people had to make a claim tomorrow, 40% said they would need to dip into their savings, and more than a quarter that they would use a credit card. Understanding the excess you will need to pay if you need to make a claim is really important, and amounts can vary significantly.”
Car insurance costs have been rising to unprecedented levels. In January this year, the average policy reached an all-time high of nearly £1,000 – a rise of £366 compared with 12 months earlier, according to Confused.com.
Motivated by the incoming ultra-low emission zone (Ulez) charges, one reader from London swapped her blue diesel Range Rover Evoque, parked on the road in Ealing (for which she paid £618 for insurance in August 2022) for a black petrol model. At that point she paid an extra £400 for the insurance.
“I imagined the total cost for the new vehicle would therefore be in the region of £1,000 to £1,200 for this year. Steep, but doable if you are a petrolhead like me,” she says.
“But when it came to renewing in August 2023, I was shocked to find the price quoted was £3,555, and no other insurers could beat that.”
She was told this was partly because she had changed the car colour, with black being more attractive to thieves.
Anna-Marie Duthie, insight consultant at Defaqto, says some insurers claim to be struggling with claims inflation. This is because of higher repair costs due to rising energy prices, increasing labour costs, and the lack of availability of repairers and tradespeople, plus difficulties getting hold of spare parts.
“Increased costs are being passed on to customers, which is, most likely, why we are seeing premium increases and effects on excesses, as they attempt to balance the impact on the customer,” she adds.
To keep insurance costs as low as possible, the advice is still to shop around and haggle for cheaper quotes.
“Insurers may be happier to offer a discounted price than to lose your custom altogether,” says Richardson. “For younger drivers, taking out black box insurance – using technology to track your car and calculate how safe a driver you are – could mean your insurer can use data to decide whether to reward your driving skills with lower premiums.”
It is also more expensive to insure your car if you cannot afford to pay for your cover in one go every year.
Richardson says: “Those paying monthly can end up paying hundreds of pounds more over the course of a year due to the high interest on repayments. The Financial Conduct Authority should take action to name and shame the worst culprits, with tough punishment for those found to be charging excessive interest.”
Other ways to keep costs down include renewing early. Banks says the best time is 27 days before your renewal is due. “On average, the longer you leave it to renew , the more you are going to pay.”
