If you don’t pay attention to your car insurance policy, it may automatically roll over at the end of the term, locking you in for another 12 months. You might welcome such a hands-off renewal. No need to compare car insurance policies or speak to a customer service agent. Your coverage and your bills will simply continue as before.
The benefits of automatic renewal
And in some ways, automatic renewal of car insurance policies is a boon. Under the Continuous Insurance Enforcement legislation that came into effect in 2011, drivers face steep penalties for driving or even owning, a car that isn’t covered by an up to date, an active insurance policy. If you aren’t on top of your car insurance policy and it expires, you could be found guilty of an
Letting your insurance lapse is risky business
Continuous Insurance Enforcement Legislation and the risks of letting your insurance lapse are the reason auto insurers give for implementing
The costs of automatic renewal
But you also don’t want to be locked-in to a car insurance policy for another 12 months. You’ll pay dearly for the convenience. Generally, as they renew your policy, your insurer will nudge up its prices, counting on your inattention or inertia to keep you locked in. MoneySuperMarket has found that motorists who stuck with the same insurer paid an average of $50 more for the same policy they had the year before. These drivers also deprived themselves of the chance to find a better deal elsewhere, by comparing quotes. Motorists can save upwards of $300 a year on their car insurance policies by simply shopping around.
But despite the financial penalties of auto-renewal, a third of British and American motorists are passively allowing their car insurance policies to roll over each year, collectively overpaying annually.
And consumers aren’t happy about it. The internet is awash with motorists shocked to discover their policies had auto renewed at an increased price and wondering if the practice is legal and how they can exit their policies without incurring early cancellation fees. The Financial Ombudsman Service (FOS) says that automatic renewal is cited in 5% of complaints it receives about car insurance.
New Insurance Regulations
To tackle the exploitation of loyal or disengaged motorists, last year the Financial Conduct Authority introduced new regulations about auto renewal. Now when your insurers contacts you to inform you your policy will automatically renew—as they must, at least 30 days before your contract is up— they must show you both your old premiums and the new ones you’ll be charged. With the comparison you’ll be able to see if you’re being ripped off by sticking with your old provider.
But what if you failed to open the letter from your insurer notifying you of the automatic renewal and you’ve suddenly received a bill for another 12 months of premiums, at a new price? Do you have any recourse?
If you find your car insurance policy has automatically renewed, you might be able to take advantage of the standard 14-day cooling off period to cancel it. You’ll dodge any cancellation charge but you will generally need to pay for any days of coverage you did receive.
Insurance Contracts
You also might be entitled to exit an automatically renewed contract if you find your insurer didn’t adequately notify you of the renewal. Insurers are bound to tell you upfront, when you first consent to a policy, that it will automatically roll over at the end of the term. They can’t conceal this information in the fine print and terms and conditions of the policy, but it may have been one item in a long list that you checked off and signed, implying your consent. But if you think you weren’t informed from the outset of your policy about the renewal terms, check the original paperwork.
Open your mail
Additionally, if your insurer didn’t contact you to tell you that the policy would renew at least 30 days before it did, you may also be able to wiggle out of any contract. If you feel you have been treated unfairly by a car insurance company and locked into a renewed policy without sufficient notice and the insurer isn’t allowing you to exit the policy without a fee, contact Citizens Advice or the Financial Ombudsman Service.