Car insurance renewal notices are set to include last year’s premiums from 1 April, due to new guidelines implemented by the Financial Conduct Authority (FCA), which regulates the insurance industry.
How car insurance renewals work
Standard car insurance policies work on a 12-month basis and automatically renew at the end of the term for another 12-month period if the policyholder doesn’t switch to a new policy and cancel their old one. The insurer will send a renewal notice before the policy auto-renews (usually three to four weeks before).
Auto-renewing doesn’t mean you’ll automatically pay the same price you did last year. Earning another year’s no-claims bonus may reduce the price of your cover, but many drivers will find that the price of cover has increased for different reasons. Car insurance prices are increasing across the board, partly due to a jump in insurance premium tax and the rising cost of fraud.
You may also find that your insurer charges you more if your circumstances have changed since you first applied for cover (for example if you’ve moved house, changed car or made a claim on your policy).
Currently, few insurers include the cost of last year’s premium on the renewal notice, potentially disguising any price increases for drivers who have forgotten how much they paid previously.
What are the changes?
From next month, insurers will be required to include extra information in the renewal notices sent to customers. The renewal notice must include details of last year’s premium, or outline the costs paid by the customer over the year if they have made any changes during the term of their policy.
Under the new guidelines, renewal notices must also invite customers to check the cover is still suitable for their needs, and remind them that they can compare prices offered by other insurers.
Drivers that have renewed with the same insurer for four or more years will also be encouraged to shop around for a better deal, with new renewal notices stating: “You have been with us a number of years. You may be able to get the insurance cover you want at a better price if you shop around.”
The changes follow a consultation by the FCA that ran from December 2015 to March 2016. By implementing the changes, the FCA aims to: “remove barriers to consumers shopping around and switching, and to ensure consumers are treated fairly and that communications are clear, fair and not misleading.”
Could you pay less for car insurance?
One of the best ways to ensure you’re paying the right price for cover is by shopping around for a better deal. Compare car insurance quotes with uSwitch below and see if you could be paying less.
Do you remember how much you paid for cover?
Tell us if the new renewal notice guidelines will help you. Do you keep track of how much your insurance costs each year? Take our quick poll below: