As sure as the sun rises in the east, your car insurance will renew annually.
It’s a comfy legal requirement – every car must be insured all year round (unless it’s had a SORN declared), so insurers will usually keep you protected unless you make alternative arrangements.
You get a renewal letter from your insurer a few weeks before the cover expires, and if you do nothing, the policy carries on as before. You won’t need to worry about switching, admin, paperwork, or trusting an insurer that you don’t know. Everything just stays the same.
But of course, nothing good ever comes for free. Some drivers may find that the cost of their auto-renewal quietly creeps – or shoots – up year on year.
If something gets too expensive, inevitably we want to find a cheaper alternative.
But is an insurance price hike you only get once a year really enough motivation to shop around? Working alongside University College London’s researcher in consumer behaviour, Dr Joe Gladstone, GoCompare Car Insurance spoke to the UK’s driving public to see why they stick with their insurer, or switch to a new one.
Why switch car insurers?
People allowed their insurance to renew for a number of reasons, for instance 35% thought their renewal price wasn’t hugely different to last years’, and only 4% needed to save money.
Despite this, 50% of people were more likely to switch if last year’s premium was prominently displayed alongside the renewal price, and 43% of people wanted insurers to go one further and put premiums available from competitors on the front page of the letter.
Just 10% of people surveyed had never switched car insurance, and 55% said it was ‘very straightforward’ to do when they did it.
A hefty proportion of people were open to changing providers, and there were a variety of reasons why.
For instance, 71% were motivated by yearly increase in price – the policy renewal price in their letter had gone up. For another 20%, the renewal letter had reminded them, and 44% boasted they always shopped around. And 6% had bought a new car and wanted a new policy to match.
Dr Joe Gladstone rigorously analysed the participants’ responses and realised there’s so much more to shopping for car insurance than price – it’s a lot to do with personality type and financial stress, too.
Switchers and stickers
According to Dr Gladstone’s investigation, switchers have a good education with a Master’s degree or above, they know interest rates and bank balances like the back of their hand, and they’re typically middle or upper-middle earners.
They can be conscientious, but usually pessimistic and disagreeable. Dr Gladstone described this group as financially stable and unstressed.
Conversely, stickers have a lower income bracket, but they’re highly optimistic, trusting and agreeable.
They describe themselves as ‘spendthrifts’, but often pay over the odds. They were also less likely to switch if money wasn’t a source of stress in their childhood. Dr Gladstone described this group of people as financially distressed.
Financial stress makes you misera-bill
Dr Gladstone wanted to see if personality influenced switching behaviour, and why some drivers engage with financial commitments more than others.
Both financially distressed and unstressed people were presented a car insurance renewal letter, and asked to remember as much information as possible about it.
Those that were financially confident and stable spent a lot more time reading their bill, 54 seconds all in all, and 81% remembered the balance due correctly.
Financially distressed people only spent 37 seconds looking at the bill, and 68% correctly retained the information within.
The findings seem to suggest that people who are in financial distress (or who feel that they are) will be the least likely to shop around. On the other hand, those who feel optimistic about their finances and who’re typically better off, do switch.
Will auto-renewal save you money?
There are two veins of thinking here.
Those who already switch, who are financially stable and unstressed, may save money because their challenging nature helps them sniff out a better deal if it’s out there. There are usually savings to be made, but it’s unlikely to impact their quality of life.
For others who are financially stressed and unlikely to tackle their finances head on, they may not challenge their insurer, even if their premium is clearly increasing. If this group of drivers could feel more confident about taking control of expenditure, they could also take control of financial instability.