Consistently Cheap Car Insurance

Learn why no one, especially redheads living in teepees in Staines, should go to consistently 'cheap' car insurers.

As every Londoner knows, the way to cross the road is to put your head down, look neither left nor right, and cross. The cars will stop for you. (They're almost stationary already anyway.) I'm still alive so it must work, I reckon!

Other than the resultant occasional bruises and frequent wild tooting on my mad journeys to and from work, my (sometimes painful) relationship with cars doesn't go beyond the analysis of car finances. However, when I worked in the general insurance industry I didn't put my head down; I looked around a lot to see what was going on. I still do that now. Here are the two things that have most caught my attention this year.

1. The cost of car insurance

The cost of car insurance has been steadily falling for three years, thanks to an incredibly competitive market. Sadly, though, this decline has now stopped. Inflation and big insurance payouts in recent years are beginning to have an effect.

The AA's latest car insurance index shows that at the beginning of last year the average cost of a comprehensive policy was £762, but at the start of this year it was £806, an increase of 5.5%.

Third-party, fire and theft policies went up even more. The average cost was £941 and is now £999, up 5.8% in a year.

However, the AA reckons that the shop-around premiums were hundreds of pounds cheaper than the average. Typically you could save £338 on a comprehensive policy and £452 on a third-party policy! With car insurance, if your best quote is £400, it's very likely that your worst will be around £1,000, with all the other insurers spread out in between. So I reckon the AA's figures are probably fairly accurate.

2. Consistently cheap insurers

Recently I saw a table showing the top ten most consistent car insurance companies. However, this is something I'd urge Fools not to pay any attention to.

The first problem is that if an insurer is consistently just below average across the whole market then they consistently will not be the cheapest for you. Remember, the difference between your average and the lowest quotes will be hundreds of pounds.

Insurers specialise by analysing statistics they accrue over the years, so that they can say things like "We reckon red-headed people with blue cars living in teepees in Staines are less likely to have accidents than other drivers, so we'll offer these people cheaper insurance than anyone else."

All insurers have to find where they feel they can be more competitive. If an insurer is being consistent, they are almost certainly not being clever enough, which means they're not finding these profiles where they can be top of the market.

Furthermore, just because they consistently offer slightly better than average quotes to new customers, that doesn't mean they'll offer you a reasonable quote when you renew. Insurers find it very easy to charge customers more once they've roped you in. Not looking around at renewal is the most expensive mistake you can make.

> Read our 21 tips for reducing car insurance prices in our guide to Cheaper Car Insurance.
> Compare car insurance through The Fool.