Insuring a car? It's a jungle out there!
Car insurance is a cut throat business so insurers use a number of methods to increase their profits at your expense. Some of these are legitimate, some dubious and others downright dishonest. These are some tricks to look out for:
Poor service, premium phone number
You buy a cheap policy, pay the premium and straight away run into problems. Perhaps your documents don't arrive, there are mistakes in them, or you are asked to provide more details. The problem is: your emails are not answered and the only way you can contact the company is via a premium rate phone call which costs a pound a minute or more. You ring only to be met by a pre-recorded message that seems to go on for ever. You finally speak to a real person who promises to look into it, puts you on hold, and a few minutes later the phone goes dead leaving you no option but to repeat the process (at over a pound a minute) only to eventually speak to a completely different person, which means you have to start all over again . You've been had, just like thousands of other UK motorist.
This often runs in conjunction with the trick above. You buy your policy and a few days later you get a letter demanding absolute proof of the no claims bonus you've claimed, and a copy of your driving licence (or even the licence itself). You are given just a few days to send these, otherwise your policy will be cancelled and a cancellation charge (typically £75) will be levied. You may not be able to find these, you may not be able to get copies quickly, you may send them only for them to get 'lost in the post'. Or you may simply be on holiday and unaware of the matter. You can't contact the company without using the premium phone number and even if you do you are taken round in circles. Very soon you get a letter telling you that your cover has been withdrawn and they are keeping £75 of your money; hopefully you have not been prosecuted for unwittingly driving without insurance, or involved in an uninsured accident in the meanwhile. You may, or may not, get back the balance of the premium you paid without a struggle. Good business for your insurer since £75 is a lot more than they can expect to make from the commission on your original policy.
The premium you pay rarely makes much profit for the broker. For most of them the big money comes from add-ons such as guaranteed courtesy car (what? You thought you'd already bought that? Read the small print - it's not actually guaranteed); legal representation in the event of an accident or prosecution; breakdown cover etc. The problem is that these often represent very poor value for money and provide large profits to your insurer.
Often the pill is sweetened; you'll be offered a huge discount which makes it a more attractive proposition. What you are not told is that these extras will be automatically included in subsequent renewals - at the regular (ie inflated) prices. Many companies make far more from these than from the policy premium itself.
Protected No Claims Bonus
You buy one of these, thinking that if you have an accident your premium won't rise.
You then have a slight bump but no problem, it's protected isn't it? It comes as a shock when your next renewal arrives with a vastly increased premium, which will be automatically debited from your credit card in 14 days or so (what, you don't remember agreeing to automatic renewal? You should have read the small print).
What went wrong? Well, the insurer promised you no reduction in your NCB and that was correct. If it was 60%, it stays 60%. However, the premium that it is based on is a different matter. It has shot up because of the accident. You pay a lot more, even though you thought the bill would stay the same. Did they tell you this? No, I thought not.
Mid Term Alterations
You change your job, change your car, move to a new address, increase your mileage, get a part time job, start night shifts. These and many other alterations have to be referred to your insurer, failing which they could have grounds for refusing a claim. The actual underwriter may, or may not, request an extra premium; the broker (most 'insurance companies' are actually brokers) can decide on whether or not to charge a fee for changing their records. Some major companies charge nothing at all because they have a reputation to protect; certain others extract an extortionate fee (we have seen cases where over £100 has been demanded) just for a little minor clerical work). As always they have the right to do this, buried in their terms and conditions.
Avoiding getting stung
Treat every policy you are offered with suspicion. Check the Internet for reviews of the company you're thinking of dealing with and read through their policy documents (by law they have to make these easy to find and understand). Be particularly careful with offshore companies in jurisdictions such as the Channel Islands, Bermuda or Gibraltar. Many, if not most of them, do not come under the authority of the Financial Ombudsman service, which is obligatory for UK registered companies. There are of course a lot of fine, upstanding and ethical insurers in these regions but some are no better than they should be, and have you ever tried to sue a company in a foreign court?
Getting your own back
Most people who have been ripped off complain to their friends or post abusive reviews online but eventually take it no further. This is a pity because it encourages the insurance sharks to keep on biting trusting motorists.
Every insurance company that operates in the UK has to be authorised and regulated by the Financial Conduct Authority; a watchdog with real teeth. If you have a genuine complaint about an insurer they will look into the matter for you. Make sure your letter to them is factual and not emotional (calling them a bunch of thieving scum won't help, even if it's true), keep copies of every communication you send or receive and stick to your guns. Most of these firms cave in and settle rather than be investigated by the FCA, which has the power to put them out of business. Complain to the Insurance Ombudsman if they are a UK based company (offshore insurers are often immune; see above). Is it a fairly small sum you feel you've been cheated out of? Then try your local small claims court. They are informal, fees are low and your opponents can't claim huge legal costs against you even if you lose. Most companies are tempted to settle before the hearing to avoid the expense of defending a small case and the potential damage if the judgement goes against them.
And finally ......
Staying with well established and respectable insurers may cost a little bit more at first but it could prove a cheaper option in the long run. Plus: what price can you put on peace of mind?