The Best Places To Shop For Car Insurance

Do you get better or worse cover if you buy car insurance online?

It's around this time of year that the Association of British Insurers releases statistics it has compiled from the previous year. For me, it always inspires several new articles and tips.

My latest inspiration comes, like several others in the past month, from their UK Insurance - Key Facts document. Piecing together the data, I can ascertain trends about where we buy our insurance and whether this has resulted in better or worse insurance cover. By this I mean, if we are buying less from brokers and more from other sources, are insurers still paying our claims, or are they finding more ways to reject our claims?

I'm going to focus on car insurance for this piece, for reasons that'll become clear.

Have more online sales resulted in worse cover?

The proportion of people who buy general insurance (e.g. car, home and travel insurance, but not life insurance) through a broker has, indeed, fallen significantly in the past 10 years (until 2007). Now just 34% of such insurance is sold through brokers, whereas a decade ago it was 55%.

A large part of this change will certainly be car insurance sold over the Internet. Can you name even one person who still hasn't compared insurance prices online? I can't.

But are you missing out by not getting advice from a broker? Evidence from the report indicates that we're not. In 2007, insurers took £10.5bn in car-insurance premiums, yet it paid out £8.2bn of that in claims. That's 78% paid back to the customer. Plus, don't forget that the insurer will have other costs: staff, heating, lighting, rent and so on.

This figure, close to 80%, has been pretty static for many years. We can therefore speculate with reasonable confidence then that buying online has not resulted in poorer cover.

Banks and building societies have gained, too

Surprisingly, banks have also done well in the past ten years. Their share of general insurance sales was 16% in 2007, says the report. Ten years earlier it was just 5%. This is surely because banks have become noticeably better at cross-selling other products. Unfortunately, banks charge captive-audience prices to their existing customers, which is why it's rare they'll come close to beating the best prices elsewhere.

We can quite safely assume that the banks' share of car insurance has not risen so dramatically, which is why I chose to consider car insurance today. It's likely that home insurance and PPI have been the biggest contributors to this increase, as these policies are much easier to cross-sell with mortgages, loans and credit cards.

I'm glad to see brokers retain a third of the market, as it means more options that help to maintain competition. Brokers continue to be useful, and the silver-tongued amongst us can do well by negotiating with them. The equally attractive alternative is to compare online where prices are fought tightly. These are your best two options. But please, not your bank.

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