Cheaper car insurance in 10 steps

Neil Faulkner reveals ten seriously easy steps to cheaper car insurance.

I used to work in the insurance industry on the legal side and as a consultant, amongst other things. During this period I learned some incredible facts about how car insurance is sold.

What directly concerns every driver, almost without exception, is that you pay at least £20 too much every year for your car insurance. Many of you pay hundreds of pounds too much. The largest mark-up I've ever seen was for £1,600 but I'm sure there's been worse.

For a wealth of reasons buyers are behind the game and the sellers win every time. Here are ten tips to significantly reduce the price of your motor insurance.

1. Get three or four quotes in writing

Despite, or even because of, greater regulation on insurance sales, we're less inclined to shop around now, so says the Association of British Insurers. This is a big mistake because insurance prices vary massively from insurer to insurer. Start looking for quotes early, and get three or four. Don't assume that, as your insurer seemed cheap last time, it will be again next time. This is the easiest way to get ripped off.

2. Keep your initial quotes to yourself

Don't tell any of the insurers or brokers what your other quotes are. It's common practice in the insurance industry not to offer the best price, but simply to beat the competition. For example, if you tell a broker that an online insurer has quoted £300, the broker isn't going to give you their best price of £250. Instead, they'll offer you cover for £290. You've now lost £40, and you'll probably do this every year if you don't keep your cards pressed closer to your chest.

3. Look and act the part

Don't visit a broker gloating about your latest business deal, and your resultant four-week holiday to Dubai. You don't want them to know you're made of money; you can get a quote for travel insurance later. Conversely, you don't want them to think you'll have trouble paying for it either.

Let's start with the wealthy. If you live in an affluent area and have a fantastic car, they'll find out about it during the course of the quote. You might want to drop into the conversation that you have to trade down, because you can no longer justify the maintenance costs. Hopefully this will put them off the scent of your fat wallet. If you can't pull off this act, at least dress-down; make it harder for them to guess what you can afford.

Conversely, if you live in a poor area you'll want to work on looking solvent. It's not unheard of for unscrupulous insurance providers to keep lists of roads and estates that have bad payment records. They then quote ludicrously high premiums to get rid of 'undesirable' customers. To overcome this, you could dress smartly and tell them straight away that you're going to pay for your policy in full and up front. It doesn't matter if it's not true, because when they quote they're committed. You can then ask for monthly payment terms, "Just in case."

4. Be friendly and polite

A good adviser can dig around, make phone calls and do extra work to find you a better price. They're not going to do this if you're rude.

5. Appear to be happy with your current provider

If you seem hesitant about leaving your current insurer and praise everything they do, other providers will feel they have to work harder to win your business. It also makes you sound like a loyal customer, which is exactly the sort they want. It all adds up to better service and, often, a cheaper quote too.

6. Don't answer questions about your budget

It's not unusual to be asked, 'What do you expect to pay?' or 'What have you budgeted for?' Put another way, they're asking, 'How much can we charge you?' Whatever you do, don't tell them. Just insist that you don't know yet.

7. 'Come back if you get a better quote elsewhere'

It's not unusual for an insurer or broker to tell you this. What it means is that they're not giving you their best quote from the start. You should head this off before they quote by saying something like, 'I don't have time to go backwards and forwards. I'm getting three quotes and I'm going to buy from the cheapest.' You must tell them this before they quote, or they'll be committed.

8. Understand the cover that's included

The policy might be cheaper, but that doesn't mean it has everything you want. Use this list of questions to check you're getting the right cover:

• Is it Comprehensive, Third Party, Fire and Theft, or Third Party Only?
• What is the total policy excess in the event of claims? What about the excess for windscreen claims?
• Does it cover all the drivers I asked for?
• Does it include legal expenses and breakdown?
• Does it include a courtesy car? (Note that not all comprehensive policies include these by default.)
• Can I make an unlimited number of windscreen claims?
• How many windscreen claims can I make before it affects my no claims bonus?
• Is the full cover extended to Europe for the period I asked for?

9. Free legal expenses

The profit on legal expenses insurance is outrageous. We are typically charged £20 for legal cover, but the cost to the insurer or broker for each policy is usually no more than £2. That's a sickening 1000% mark-up.

You can get around this. Let's say a broker's given you their first quote and you've made it clear that you're not going to come back for another (see point 7). Now you give them hope, at a price. Tell them that, if they give you the legal cover for free, you promise you'll give them another chance if you get a better quote elsewhere. The canny providers will see this as a fair trade, and will accept your terms.

10. Give your favourite another chance

In theory, you could keep going between providers, giving them the opportunity of beating your latest quote, but doing this the returns rapidly diminish. However, you should offer at least one of the car insurance providers that quoted a chance to under-cut your cheapest so far. This is the time to tell them your best quote. You could save yourself another ten or twenty pounds.

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