Ten ways to pay less for car insurance

HAVING suffered hikes to insurance bills of up to 20 per cent over the past year, drivers are being warned to brace themselves for more increases over the next 12 months, despite a fall in accidents on the roads.

Accelerating claim costs are expected to send premiums soaring again in 2010. Insurers say "ambulance chasing" lawyers are partly to blame for encouraging anyone involved in an accident to sue for maximum compensation over every injury or inconvenience no matter how small. But a spate of recent bad weather claims could also reverse the trend of falling accident numbers, pushing insurance prices up even further.

Over the past three months, alone, motor insurance has skidded upwards by 7 per cent, according to the latest benchmark AA British Insurance Premium Index. This is the biggest leap on record, and comes at the end of a year which saw bills rise by 19 per cent.

But these figures hide worrying trends. Prices paid by premium tarts, those who shop around for the best deal, rose even faster. Drivers trying to cut bills by opting for third-party cover only are also in for a miserable time. The cost of their cover is rising fastest.

Premium tarts paid 11 per cent more for insurance from October to December 2009, with premiums soaring an eye watering 23 per cent over the year. Those shopping around for third-party cover paid 14 per cent more over the past three months after being hit by an unprecedented 34 per cent rise over the year.

Analysts predict that many insurers are deliberately withdrawing special offers and cheap deals, and exiting the third-party market.

Disconcertingly, the AA figures don't include future rises already announced. Some companies, such as Zurich, have confirmed their premiums will rise by 20 per cent in March.

Simon Douglas, director of AA Insurance, says: "Many insurers have been reporting significant rises in personal injury claims, with people willing to pursue claims for even minor injuries, such as mild whiplash pain that in the past they wouldn't have bothered claiming for.

This is encouraged by personal injury claims lawyers whose marketing urges people to make claims and whose costs, as well as compensation for the claim, are met by the third-party insurer. Unfortunately, these claims are paid for by drivers and feed back to premiums.

Douglas adds: "The cost of accident damage has risen steadily, despite a fall in the number of accidents on Britain's roads. The spate of collisions during the recent wintry spells, resulting in about 30 per cent more claims than normal, may reverse that trend over the short term, though."

The AA found that the average premium for comprehensive cover rose by 7 per cent to more than 1,000 over the past three months. The average quote for third-party fire and theft was even higher, rising by 9 per cent to 1,252

These costs could be reduced by shopping around, but the differential is falling. Comprehensive cover quoted to premium tarts leapt 11 per cent to 613, while third-party soared by 14 per cent to 788.

Taking steps to protect yourself again a nasty financial accident when you next renew your cover has never been more important. Here are ten ways to cut the cost of cover:

1 Shop around

Most companies send you a renewal quote based on what they would like you to pay. If it's higher than last year do not accept it. Call your insurer immediately to say you are unhappy, and see whether they will reduce the premium and if so by how much.

Whatever they offer, say you will think about it and call back. Meanwhile, check out what is available on comparison websites, such as www.confused.com, www.tescocompare.com www.theaa.com, www.moneysupermarket.com etc. If you come up with a premium which is even lower then call your insurer back and ask them to match this. If they refuse, move elsewhere.

2 Play the system

Take great care when filling in your application forms, as much of the underwriting is now automatic, and you can score quite differently by making small adjustments to your answers. Provided you are giving accurate information this should not be a problem.

One area to watch is occupation. The classic is journalist/editor/writer. Such people may be doing identical work, yet have very different risk ratings for insurance. Similarly, accountants and insolvency practitioners. Accountants are seen as safe but those involved in bankruptcy work as a higher risk. Another might be taxi-driver and chauffeur.

Also take care when filling in your mileage. Insurers rate customers in bands, depending on the amount of time they spend on the road. But these bands can differ from insurer to insurer. It will pay you to get to know how the bands differ, to get into the lowest group possible. For example, if the bottom band is up to 7,500, there is little sense in inserting mileage of 8,000 which will push you into a higher group.

3 Limit usage

You can cut bills by restricting who drives the car. Limit cover to named drivers only. But you can also cut costs by restricting the mileage. A lower mileage band will save you around 10 per cent.

Unfortunately many insurers are very secretive about where they place their bands, so it can pay you to play with some different numbers, to see if these bring significantly different results.

Be aware though, that it would be unwise to claim mileage which is significantly different from what appears on your MoT certificate.

4 Increase excess

You may be able to cut your premium by agreeing to pay a bigger amount towards any accident.

This can be of particular help to young drivers. By agreeing to a 1,000 voluntary excess, for example, you are effectively removing the insurer from becoming involved in any small bump, and self-insuring.

However, beware of confusing voluntary and compulsory excesses. Many of the comparison websites allow users to choose their own voluntary excess. Some drivers chose a policy unaware that as well as the voluntary excess, the cover also includes a compulsory 500 excess, say.

Read the small print carefully to make sure you fully understand your own first liability, in the event of an accident.

5 Move to a smaller car

With bills rising sharply, now may be the time to move to a smaller engine. As our tables show, you will pay up to 50 per cent more for a BMW five series, than for a Fiat Brava.

Also do not modify your vehicle, as insurers hate this and penalise the driver.

6 No-claims discount

Start building up a no-claims discount at the earliest opportunity, because it can reduce your premium by up to 60 per cent. It makes sense to pay a bit extra to protect it.

7 Senior savers

Premiums can go up sharply for older drivers, with half insurers refusing to quote for the over 80s irrespective of health. Companies which will provide cover include: LV>, which will insure the over 85s; Aviva and M&S, up to and including 85; Cornhill Direct up to 84; and Zurich Connect up to 83.

Companies which specialise in mature drivers, such as Saga and Age Concern, have no age limit. If you are in good health, then providing a doctor's letter, or taking further driving instruction or tests may help keep premiums down.

8 Young drivers

Driving has become prohibitively expensive for young male drivers in particular, with most insurers unwilling to offer cover to 17-year-old men.

It can help to do some additional driving qualifications, such as passplus, driving a very low-risk car, and limiting mileage dramatically. Some local authorities will help pay towards the cost of additional lessons.

The most valuable way to cut premiums, apart from getting older, is to start building up a no-claims discount. For this reason, it can make sense to buy an old banger, and insure it in your own name, rather than drive a parent's car and go on to their insurance.

If you do buy your own car, putting mum on as a named driver can help cut your premium. An older experienced driver sharing the car will cut the risk, and insurer's prefer mums to dads.

9 Pay annually

You will be charged a surcharge, which can be significant, if you opt to pay for your cover monthly. If possible, pay at the beginning of the year.

10 Be safe

Don't be a careless driver. Two small accidents in a year can double your premium, according to Will Thomas, head of car insurance, at confused.com. But garaging your car at night, and having good security will all cut premiums, as will keeping a clean driving licence.