The £100 car and home insurance rip-off!

Read about this rip-off and you could easily save 35% on your car and home insurance.

My current perception of home and car insurance, based on anecdotal evidence, is that premiums are rising massively. People have been telling me that their renewal notice has arrived and the cost has inexplicably risen hundreds of pounds.

However, statistics show that this isn't the case. According to the AA, at the start of last year the average quoted comprehensive car insurance policy was £762 and now it's £802, an increase of just £40 (5%). Third party, fire and theft went up from £941 to £993, an increase of £52 (5.2%).

As for household insurance: buildings insurance went up from £208 to £211 (1.2%) in a year and contents insurance down from £152 to £149 (1.78%).

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So, at no more than a 5.2% average increase, the changes in average quoted premiums do not reflect the experiences that have been reported to me.

However, I believe the answer is simple: many insurers are quoting massively inflated renewal figures.

A reader recently wrote in to say that one insurer has routinely been adding 35% to renewal quotes for household insurance, which can easily add £100 to most people's buildings and contents insurance!

Speaking as someone with a background in insurance, I can tell you that this is not unusual. Most, if not all, insurers and brokers will happily increase premiums at renewal, because they know that many people will simply renew. On average people only shop around every three years for car insurance, and every ten for household insurance.

The thing is, though, that if you get a new quote from the same insurer or broker, they will almost certainly improve on their renewal figure. The same reader who reported the 35% increase said that the insurer quoted £100 less if you got a new quote online, rather than accepting the renewal premium.

Furthermore, compare the average quoted premium with the shop-around premium:

Figures from the AA

As you can see, the savings for shopping around are huge: on average more than £300 for car insurance and about £130 for both buildings and contents.

Here are some more thoughts:

• Don't just renew automatically, even if the renewal quote is the same as last year. Your insurer/broker might write to say it's 'delighted' to offer you the same price, but in reality the cost of insurance might have even come down!
• For many years direct insurers offered heavily discounted prices, for some lengthy periods losing 10p or 20p for every £1 taken in premiums. But now that they've built up large customer bases, they'll feel happy to increase renewal premiums even further.
• Don't get emotional about it. It's not about the principle, it's about cost. So, if your current insurer/broker has handled your claims well in the past, offer them the opportunity to beat your best shop-around quote: even if they at first tried to renew for 35% extra!

More: Get great car insurance | Get a better home insurance deal