Sainsbury's promising £300 of benefits with its car insurance

Sainsbury's new car insurance offer comes with £300 worth of benefits. But is there a sting in the tail?

Sainsbury's is offering up to 15% discounts on its car insurance, as well as free breakdown and double Nectar points. It estimates that the total package could be worth nearly £300 in savings.

A quick comparison

Looking at a reasonably young driver with a clean history and an ordinary car, a Sainsbury's policy with legal cover, protected bonus and the free breakdown costs 15% more than some other policies with similar cover. If you buy the legal and breakdown policies separately, you'd save even more money.

In total, you're looking at paying £150 to £200 less with the supermarket's competitors – and with a much lower excess to boot. That said, some Nectar card holders (“at least 10%”) will get the maximum discount of 15%, which might bring the price a lot closer – if not the policy excess.

If you spend £150 a week in Sainsbury's and other Nectar stores you could also get close to £80 in extra Nectar points, thanks to its double Nectar offer. In total, it's possible that Sainsbury's will save you £300, but it seems likely that others will save you more.

One or two differences matter a lot...

When I aged our test driver to 30 and married him off, Sainbury's came out very near the top when comparing policies with similar levels of cover. Some Nectar card holders might do better if they get closer to the 15% maximum discount. Throw in the Nectar points, and this could well be your best deal.

All this demonstrates how insurers have their target markets, which is why your neighbour or brother could pay drastically different prices. Insurers quote cheaply for their desired customers and price themselves out of the market for others. Move address, grow older, have a claim, or change your car or job, and other insurers will no doubt be better for you.

Furthermore, an insurer can change its pricing policies from year to year, so it might suddenly become less competitive for you even if nothing much about you changes. This is particularly so, because insurers reward loyalty with higher prices.

...but discounts? Not so much

You can't judge an insurer by the size of its discounts. Consider that a few years ago Tesco was promoting a 70% discount and another 15% discount on top – as well as £50 cashback plus Clubcard points. With all that you'd think by this point the insurance must basically be free but, even then, the insurance was not the cheapest for everyone.

Tesco is currently offering a 10% online discount and up to 15% on top for Clubcard holders, and £25 off fuel at Tesco filling stations. Churchill is offering 12 months for the price of 10 and Aviva 15 weeks' worth of free car insurance. Are these insurers then the cheapest? As with Sainsbury's, they could be for some people, but won't be for most.

Insurers can manipulate their prices to make discounts sound more attractive. All discounts are meaningless without knowing what the total cost will be. An insurer can secretly add 50% to a basic premium, and then announce you're getting a 25% discount to make it sound appealing. If you run a comparison, you will find that insurers that don't offer discounts are just as likely to be cheapest for you.

It's good for a year

As usual, Sainsbury's' offer on discounts and breakdown cover is for one year only.

The supermarket tries to tie you in by offering double Nectar points for two years, but don't be fooled: the only way to keep getting a good overall price is to shop around every year. You'll save thousands over your life by comparing prices. It's a tedious task that the industry relies on you putting off at renewal, but it is undoubtedly worthwhile.

A trick of the trade

When it comes to renewal time, you may find that your new premium has not changed, or even gone down.

This could be sold to you as good news. However, in my experience working in the industry, it's just as likely that, for your particular profile, the costs have gone down everywhere, so other insurers could still offer you a better deal.

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