Car insurance companies battle to retain custom

When it comes time to renew our car insurance policies most of us take the easy option and stick with what we know. In fact in the UK, around 75 per cent of customers stay with their insurer year after year.

Nevertheless, the growth of car insurance price comparison websites is slowly starting to eat away at that number with more drivers than ever willing to shop around. This in turn, has created a battleground for insurers who are desperate to hang on to existing custom.

There are many tactics being employed by the car insurance companies, but just how good are they? Let’s take a look at some of the most popular incentives on offer:

Car insurance retention tactics: no-claims protection

The no-claims discount is arguably the most worthwhile of all the retention tactics. The fact is that most other insurers won’t recognise a no-claims discount built up elsewhere.

So many car insurance providers now offer no-claims protection – meaning that if you make a small claim it won’t wipe out your existing no-claims bonus. For example, Direct Line has stated that any vandalism claims will not affect no-claims discounts.

The no-claims tactic extends to named drivers too. Many insurers will allow additional named drivers to build up a no-claims discount – but this would be lost as soon as the named driver attempted to find a car insurance policy elsewhere.

Car insurance retention tactics: direct debit roll-ons

You can save money by paying for your car insurance by monthly direct debit. However, paying by direct debit also allows the insurance companies to roll on your polices so you don’t have to take any action to renew your deal. It’s a simple tactic that allows drivers to forget to search for better deals at the end of the contract.

My advice is that you should continue to pay by monthly direct debit but make a note of your renewal date on a calendar so you remember to shop around each year.

Car insurance retention tactics: penalties

Many providers will not offer a refund on your annual premium if you choose to leave mid-term. Furthermore, some companies now charge penalty fees for breaking a contract.

Whether or not you want to break your contract should really depend on your circumstances. If you can wipe out the penalty fee with the savings you make elsewhere then make the jump. Otherwise, make a note of your renewal date and wait until the contract expires to shop around.

Car insurance retention tactics: loyalty offers

The most obvious retention tactic car insurance companies employ is to offer discounts at the time of renewal. For example, More Than has recently announced that customers who do not make a claim over the course of a contract will be eligible for two months’ free car insurance.

It’s a neat incentive that shouldn’t be disregarded. However, the fact is that you can make far larger savings by shopping around.

Most car insurance providers offer significant discounts to new customers – sometimes ranging from 10- to 25 per cent. Other insurers offer free months as soon as you sign up and there are several cashback deals on the market too.

Insurers also attempt to retain custom by offering reduced prices for multiple policies – such as if you need to insure a second vehicle. While this could certainly save the hassle of dealing with two separate car insurance companies you could still find much cheaper deals by making a thorough search of the market.

So should you choose a new car insurance provider?

The first question you should ask yourself is how happy you are with your existing provider? If you are more than content then you might be willing to pay a little extra to stick with a high-quality service rather than take the risk of jumping to a different deal.

However, there are savings to be made by shopping around. By using a price comparison tool you can find quotes from dozens of providers. There’s no obligation to switch – you can simply see what’s out there or even take these quotes to your existing provider to see if it is willing to match the deals you find.

My advice is to shop around for cheap car insurance. Don’t fall into the trap of assuming that your existing provider offers the best deal even when its incentives seem attractive. The chances of your current deal being the cheapest are slim, so why not shop around and see what other car insurance quotes you can find?