Which? is warning that car insurance customers face a growing divide between those paying monthly and annually – with consumers who can least afford to pay over the odds more likely to be hit with a penalty of £302 on average.
Data shared with Which? by comparison site GoCompare in January showed that, as of November 2022, almost half (46%) of car insurance customers opted to pay in monthly instalments – with the other half paying in full upfront.
In November 2019, customers paying monthly were charged £673 on average for a year’s cover, while those paying upfront paid £456, a difference of £217.
However, in November 2022 the difference increased to £302, a rise of 39 per cent. Monthly payers paid £757.60 compared to £455.49 for annual payers.
While not every pay monthly customer is paying more, the more severe price increases could be falling on the drivers least able to afford them.
According to GoCompare, younger customers often opt for monthly payments – and are usually deemed a greater risk by insurers, which could increase the premium.
Low-income households are also more likely to pay monthly, and to face higher premiums, according to the Financial Conduct Authority (FCA).
Which? is concerned by data suggesting a widening gap between customers paying monthly and annually. It’s important that the FCA monitors whether insurance providers are meeting their obligation to provide fair value under the new Consumer Duty, which takes effect on 31 July.
Jenny Ross, Which? Money Editor, said:
“At a time when household budgets are under huge strain, it’s concerning that customers who pay monthly for their insurance could be paying far more than those who pay their annual premium upfront.
“Paying using an interest-free credit card could help to spread the cost of annual premiums. Haggling and switching also remain effective ways of bringing down the cost of insurance.
“Which? has a range of free, expert advice on its website to help consumers make their money go further, including when choosing insurance.”
Which? tips for saving on car insurance:
1. Paying annually is cheaper than monthly
The latest data from GoCompare shows the gap between car insurance customers paying monthly and annually has reached £302 on average.
While it won’t be an option for everyone, those who can pay for insurance upfront could potentially save hundreds of pounds.
2. Pay using an interest-free credit card
One way of spreading the cost of insurance without being charged more is to pay your annual premium using an interest-free credit card, then pay off a twelfth of the card’s balance each month. The longest 0% purchase deals currently available last just under two years.
It’s important you meet minimum monthly repayments and settle the balance in full before the end of the 0% deal to avoid paying interest. It is worth reading Which?’s credit card provider reviews to find out how to check your eligibility for cards without affecting your credit score.
3. Don’t auto-renew
Come your policy’s renewal date, it may be tempting to let your insurer do all the work and have your policy automatically continue.
But you’re paying for this convenience. Customers who haggle are proven to save on their premiums (more on that below). And if you don’t shop around, you could be missing out on far better deals from rival companies.
4. Shop around for the best deal
Which? found that it’s worth shopping around when a policy is up for renewal. Half (48%) of Which? members who haggled in the first six months of 2022 made savings – on average £56 for car insurance and £54 for home insurance.
There are also likely savings available by switching providers. Drivers who didn’t haggle, but had changed car insurers were paying £43 less, on average, than those who remained with their original provider. Home insurance switchers were paying £103 less.
5. Search for cover on comparison sites
Be aware that some insurers set different prices depending on the method used to get a quote and some comparison sites also offer cash-saving incentives to entice customers.
For instance, when Which? checked in December 2022, Confused.com and MoneySuperMarket guaranteed beating customers’ current car or home insurer’s renewal offer or refunding the difference, plus £20 (a £20 gift card in the case of MoneySuperMarket). GoCompare offers free excess cover with car insurance. This reimburses up to £250 of the excess if you claim (excluding breakdown and glass damage).
In October 2022, Which? tested a quote for a 38-year-old Ford Focus Zetec driver and, adding a voluntary excess of £250, reduced the cheapest five quotes by between £55 and £58 – or around 12 percent.
Not all insurers or policies feature on comparison websites, so it is also worth checking directly with the insurer.
6. Consider telematics – or a black box – car insurance policies
Telematics, or black box, car insurance policies monitor your driving using tracking devices installed or plugged into your vehicle, or in some cases your smartphone. Drivers are then rewarded with premium discounts based on how much or how safely they drive – with some policies tracking aspects of your driving such as breaking and cornering, and others focused on rewarding low mileage.
7. Get the timing right
Searching for a new policy can affect the quote you receive. Generally, leaving it until the last minute means insurers are likely to charge more than if you purchased the cover a few weeks in advance of the cover starting.
The time of year can also affect your quotes. Which? analysed 33 months of car insurance premium data from Compare the Market (Jan 2020-Sept 2022), and found regular variations of as much as £50 in the average premium depending on the month you buy, with prices peaking in December and dropping between February and April.
As part of its Get Answers campaign, which aims to bring the consumer champion’s free advice to more people than ever before, Which? is highlighting the everyday life questions its experts can help to answer.
Among the guides Which? is promoting is one on cheap car insurance.
Notes to editors:
- In January 2023, Which? analysed data – shared by GoCompare – on average prices paid by customers using its service between December 2018 and November 2022. Between November 2019 and November 2022, the gap between what the two groups of customers were paying had widened by 39%.
Which?’s Get Answers campaign
Which?’s ‘Get Answers’ brand campaign showcases the breadth and depth of free, accessible and expert advice offered by Which?.
On Wednesday the consumer champion’s ‘Home of Answers’ activity goes live in London, with fly poster QR codes spread around the city allowing people to get answers to life’s everyday questions in an accessible way. TV presenter Laura Whitmore will be helping members of the public to interact with several special QR codes – including a giant parking ticket at a London parking fine hotspot, a jigsaw-themed QR code on the South Bank pointing to advice for family days out, a ‘living’ QR code made of real moss on the way to the Chelsea Flower Show, and a UV QR code in Old Street giving night owls advice on how to sleep better.
Further activity includes a ‘Home of Answers’ day in Manchester on 31st May, in which a billboard will be brought to life with real-life experts sitting behind windows within the hoarding, ready to get answers for passers-by on key issues of the day, from saving money, to travel tips or even avoiding scams.
Which? is the UK’s consumer champion, here to make life simpler, fairer and safer for everyone. Our research gets to the heart of consumer issues, our advice is impartial, and our rigorous product tests lead to expert recommendations. We’re the independent consumer voice that influences politicians and lawmakers, investigates, holds businesses to account and makes change happen. As an organisation we’re not for profit and all for making consumers more powerful.
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