Yahoo News The secret ways insurers increase your premiums – and how to beat them
Insurance premiums can vary hugely as providers use a long list of personal attributes to determine risk. Most of the key factors are either out of your hands or hard to change – for instance your age, postcode and property.
But the good news is that there are several tricks you can use to reduce what you pay for your insurance policies.
The Financial Conduct Authority, the City watchdog, has said it will ban home and motor insurers raising prices over time for existing customers.
It blamed what it called a “loyalty penalty” – where insurers entice customers with cheap premiums but then raise prices year on year while offering new clients better rate – for abusing loyal policyholders.
The FCA said insurance companies are able to use lots of data, and know when people are shopping around, to game their prices and make the most money possible from customers. Telegraph Money looks at some of the ways consumers can fight back.
Shop around
Ian Hughes of Consumer Intelligence, a research group, said you will still be able to gain from shopping around after the ban as there will be differences in the prices set by different insurers.
Anna McEntee of comparethemarket.com, the price comparison website, said the latest data showed that people could save up to £289 a year on motor insurance and £103 a year on home insurance just by shopping around.
James Daley of consumer group Fairer Finance said it is important to use price comparison websites to see the deals in the market.
However, he warned that when generating quotes your current insurer will be aware that you are shopping around. Your insurance provider is likely to be among the list on the price comparison website and they will be notified if a customer is regularly requesting quotes.
Christopher Woolard of the FCA said insurers can see your behaviour and price their premiums accordingly if they see that you are regularly switching providers.
Consider the terms you use
Occupation can have a large impact on the price you pay for insurance. Car insurance policies can vary by more than £200 depending on profession and employment status.
Those who are looking for a cheaper premium should consider how they define their day-to-day job, Mr Daley said, adding that there are often multiple accurate ways to describe your occupation.
For example those who are unemployed may call themselves a stay at home parent, which generates a premium that is much cheaper than if they say unemployed. On average, motor cover is 40pc more expensive for those who classed as jobless.
Mr Daley recommended trying all the options on a price comparison website to see which answers generated the lowest premium. However, it is important to ensure that all information given is accurate.
Add more people to your insurance
It is often cheaper to insure for two or more people than just one because the price of insurance is about risk and when two people are insured the risk is reduced, according to Mr Hughes.
Haggle
Customers should remember to haggle with their existing provider, as they may drop their price to keep you on as a customer. You have nothing to lose from trying.
Check out usage-based insurance
Usage-based insurance, which is a pay-as-you-go or pay-as-you-drive system where the provider tracks the distance you drive, can lead to cheaper premiums.
So can telematics car insurance, which is when your insurance provider monitors your driving habits and adjusts your car insurance premiums based on how you drive. This gives you a chance to prove that you are a good driver and are therefore low risk.
Registering accurate mileage will also bring down premiums. Most drivers overestimate how much they drive.
Clean up your credit score
A better credit score can also help reduce the cost of insurance. Those not on the electoral roll could pay 10pc more than those that are registered.
