Consumers often find it difficult to understand the insurance cover offered to them and its terms and conditions. To make matters worse, they are unable to judge whether it is both suitable and good value for money.
This article focuses specifically on the issue of renewing insurance cover with information and guidelines about:
- Keeping track of your insurance policies
- The FCA’s new rules for insurance renewal
- Guidelines to renewing insurance cover
What you need to know about insurance renewal
In this article we begin by explaining what has changed in the sector. According to FCA rules, what must insurers notify consumers about before their cover is automatically renewed? We also give advice about what you should do if one of your insurance policies is coming to an end. How can you ensure you get the best possible cover at the cheapest possible price?
Keeping track of your insurance policies
With the average Briton holding a bewildering number of insurance policies (motor, buildings and home contents, health, pet, travel, etc.), it can sometimes be confusing to keep track of them all. Therefore, you should review all the documents at least once a month so you know exactly which ones are nearing their expiry date.
Your insurance company will generally notify you by post 21-28 days before the policy ends. Since April 2017, the FCA has changed their rules about what information this notice of renewal should contain. They have been highly critical of some insurers who haven’t followed the rules and have even threatened some with action. So what do the new rules say?
Home insurance questions:
Home insurance policies normally last for one year. Before your insurance company proceeds to renew your agreement for another year, they should send out a renewal statement declaring the renewal of the contract unless you object. This renewal statement is expected to be sent out before your current policy expires. If you do not respond to this statement, your insurance company will most likely automatically renew your policy on the same terms.
If you do not respond to a renewal statement by your home insurance company, they are likely to proceed with the renewal of your existing policy. However, as part of your insurance contract, as is with most general insurance policies, you reserve the right to a 14 day cooling off period. This is, in effect, a period during which you are permitted to request the cancellation of your policy. However, you may be charged for the cover provided over the 14 day cooling off period.
If the value of your home increases, then in all likelihood the cost of your home insurance premiums would rise as well. This is to ensure that insurance companies provide you with the appropriate cover for the renewed value of your home or home contents. While certain types of home improvements can lead to an increased value of your home, other types of improvements, pertaining to the security of your home for instance, can help decrease the cost of your home insurance premiums.
The FCA’s new rules for insurance renewal
The FCA has stipulated that any insurer who sells general retail insurance must help consumers make well-informed choices about renewing their cover. Therefore, the notice of renewal should do the following:
- clearly show the previous premium next to the proposed premium increase
- include a prominent, clearly-worded message encouraging the consumer to shop around
- identify customers who have renewed with them for 4 or more times in a row and add an additional
- message explaining the advantages of shopping around for a better dea
The FCA have found that some companies have been in breach of these new rules. Their most common failures have been misquoting the previous premium; hiding the message about shopping around so it wasn’t obvious or not identifying the customers who needed to be informed about shopping around.
If you find your policies are close to expiring or you’ve been notified by post of an upcoming renewal, what should you do?
Guidelines to renewing an insurance policy
Checking your new policy
You should first check the new insurance premium in your notice of renewal and make sure that it represents good value for money. Unfortunately, loyalty isn’t always rewarded by companies offering financial services since they tend to keep their best promotional deals and offers for new customers. Don’t forget that if you’ve made a claim under your previous policy, you might not be able to access some cover when you renew. This especially affects health and pet insurance.
If you aren’t sure whether you’ve got a good price, your new step is to shop around.
Using price comparison websites to shop around
The easiest and quickest way to get an idea of what is available on the market is to use a price comparison website for insurance cover. Ideally, using 2 or even 3 will give you a more complete picture of what your insurer’s competitors are offering.
The easiest and quickest way to get an idea of what is available on the market is to use a price comparison website for insurance cover.
Of course price will be a factor in your decision-making process but it shouldn’t be the sole criteria. Make sure that you’re comparing like with like. For example, is the policy cheaper because the excess (your financial contribution to any claim) is higher? Or perhaps it has more exclusions which you need and are covered by slightly more expensive policies? Also, be on the lookout for costly add-ons. Ask yourself if you really need them.
Taking out the cover
Once you’ve found the policy that suits you, taking out the cover is your next step. Before you do so, check through the terms and conditions of the policy carefully. If there’s anything that you’re unsure about, your insurer will be more than happy to advise you.
You might want to go back to your previous insurer and attempt to bring their price down. You might feel uncomfortable about haggling but remember, you’ve been a loyal customer – possibly for years – so shouldn’t this be rewarded? You literally have nothing to lose. If they say no, you can always go to their business rivals.
If you do decide to stay with the same insurer because they match a price you’ve been offered by a competitor, you should still go through the policy. If your circumstances have changed in any way, you must let them know. For instance, you’ve made a large, costly home purchase or had a health condition diagnosed. If you don’t notify them, any claim you make in the future will be invalid.
Auto-renewal of insurance policies
Unless you’ve opted out of auto-renewal or your bank details have changed, you might find that time has elapsed and your insurer has automatically renewed your existing cover. Don’t worry if this happens to you. Like most financial products, you still have a 14-day cooling down period to change your mind. During this period, there shouldn’t be a cancellation fee but you will be charged for the days of cover you’ve already had. Cancelling cover after 14 days is still possible but the charges you pay will be higher.
Conclusions about insurance renewal
The new rules regarding the renewal of insurance policies have been implemented to ensure both transparency and well-informed, financial decision-making. You can save money by following their recommendations to shop around. The Association of British Insurers have calculated that you can save up to a third on your insurance premiums just by checking out offers exclusively aimed at new customers. If you multiple the possible savings by the number of policies you hold, the money you can save on insurance premiums could easily reach the hundreds.