Car insurance: renewal quote letter must include last year's premium

Insurers will be required to include previous premiums on renewal letters.

Insurers are to be forced to include the previous year’s premium cost on renewal documents.

The Financial Conduct Authority (FCA) said it felt that this step would improve low levels of engagement and switching when some types of insurance policies are renewed.

Christopher Woolard, director of strategy and competition at the FCA, said: “We hope the proposals encourage more people to shop around for the best product for them. It is important that insurers give their customers the information they need to do this and ensure they’re treating their customers fairly.”

Pushing people to shop around

Last year the regulator conducted a trial with over 300,000 people across the UK to test reactions to different types of information provided at renewal and whether it prompted them to switch.

Including the previous year’s premium on renewal notices had the biggest impact, prompting up to 18% of people to either switch or negotiate a lower premium when the price had risen sharply.

Other types of information tested included:

• Simplified renewal noticed which “reinforced key messages such as the right to cancel and switch”
• Sending leaflets about shopping around alongside renewal letters
• Reminders sent through different media, including email, letter and text message

The FCA will now hold a consultation on its plans, which will close in March, so the change won't take place until spring next year at the earliest.

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Including old premium prices

A few insurers had already declared they would include the previous year’s premium on renewal notices before the regulator issued its current proposals.

AXA was the first back in May, followed by Direct Line and LV=. Direct Line said that being fully transparent in this way was “the right thing to do”.

It’s just a shame that the regulator has had to step in to push the rest of the industry to treat its existing customers more openly.

Helping people to shop around

The FCA has proposed that insurers do more to encourage shopping around, on top of including the previous year’s premium.

The regulator has suggested that insurers should identify and specifically prompt customers who have renewed the same product four times or more to encourage them to compare deals from across the market.

It also wants to draw up guidance for insurers on how they can improve how they handle renewals, and what records they should keep of past premiums.

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The importance of shopping around

It’s no secret that renewal quotes are almost always far more expensive than the premium you pay in the first year with an insurer.

I experienced that myself last month, when I was quoted £487 to renew my car insurance with Diamond, an increase of £170 from last year, despite no change in circumstances. In the end I was able to find a quote of almost exactly what I paid last year.

So it’s crucial that you do not blindly renew with your insurer, and instead take the time to shop around and compare policies. Head to the loveMONEY car insurance centre to do that today.

Also be sure to read Ways to cut your car insurance for a host of great tips!

Compare car insurance quotes today!

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