Are you being hit with car insurance loyalty tax?
11th Mar, 2019
Are you paying too much for your car insurance? It’s such a well known saying that it’s often used as a punchline these days. There’s a reason it’s so common, though – it turns out that it’s surprisingly easy to do. Unlike scrapping your car, which you’ll only have to do once every few years at most, renewing your insurance crops up on your to-do list every year, and recent research by MoneySuperMarket showed that over a third of their respondents were being hit with a loyalty tax. Now, it’s not an actual tax, as such. So what exactly is it, and how can you avoid being charged it?
Who is paying loyalty tax?
When was the last time you shopped around for your car insurance? If the answer is ‘well over a year ago’, then you could be one of the millions of drivers who may be overpaying. The survey by MoneySuperMarket found that over two thirds of respondents had seen a rise of £40 in the cost of a fully comprehensive policy over the past 12 months. More than a third (35%) said that they had let their policy auto-renew – a service that the vast majority of insurers provide.
In a nutshell, there’s no guarantee your cheapest policy for one year is going to be your cheapest policy for the next, so it literally pays to shop around. The money you could be losing for not doing so is what we’re talking about when we refer to a ‘loyalty tax’. Those who pay for their car insurance in monthly instalments are at higher risk of this, as they’re 54% more likely to let their cover auto-renew then people who pay theirs annually.
What’s more, 27% of drivers have been with the same insurer for three years or more. While there are often good reasons for this, if you’re one of those people, we’d still recommend checking out the competition every now and again. Especially since Consumer Intelligence recently concluded that 51% of drivers could save up to £262 by shopping around online. Those are very good odds for you! The Financial Conduct Authority launched an auto renewal bill back in 2017, too, forcing insurers to clearly show the previous year’s premium at each renewal, so that motorists can easily compare it to the latest prices.
So why aren’t drivers doing more to avoid it?
Well, we’ve not done any surveys ourselves here at Scrap Car Network, so we can’t give you any scientific answers, but we’ve certainly got some ideas! The first of which is that many drivers (especially newer or less experienced ones) aren’t aware of the FCA legislation and how it helps them, or they don’t fully grasp how much they could save. It likely boils down to one of those universal truths; most people just don’t like dealing with the paperwork and hassle.
We can understand that sentiment here at Scrap Car Network. Owning and running a car generally involves a lot of form-filling anyway, so it makes sense that people would want to avoid it. This can be particularly true when the time comes to scrap your car, which is why we’ve made a conscious effort to save you as much time, paperwork and effort as we can when you scrap your car with us. All you have to do is enter your car reg and postcode into the fields above, and you can get an online valuation of your car in as little as ten seconds. How about that, eh?
