Why It Still Makes Sense To Shop Around For Insurance In 2022 – Forbes Advisor UK

The way insurers set their rates for new and existing customers will change from January 1, but it’s just as important to shop for the best rates.

Here’s how to avoid paying more than odds for coverage in 2022.

what is changing

From January 1, auto and home insurance providers will not be allowed to charge existing customers for their renewal more than they might charge a new customer for the equivalent policy.

Insurance companies have always offered their best rates to new clients as a way to attract more people to their books and increase their market share, but that is about to change.

In theory, the January changes should make prices fairer for existing customers, but prices for new customers will likely rise to meet renewal levels.

The Financial Conduct Authority (FCA), which set up the new rules, has acknowledged that the change could lead to higher prices.

In a report published last September, he said, “We anticipate that our treatment package will likely lead to some consumers paying higher prices if they currently take advantage of significant new trade discounts as inducements to switch.”

The watchdog noted that clients who do not change insurance companies regularly and pay higher rates effectively subsidize the lower rates that regular transfers enjoy. Under the new rules, it’s likely that regular switchers will lose out.

Muhammad Khan of professional services firm PricewaterhouseCoopers expected prices to rise by 5 to 9%. At the end of 2020, the Association of British Insurers (ABI) said average car insurance premiums were £468. If PwC’s prediction proves accurate, it would add between £23 and £42 to the average premium.

But just because insurance companies will bring premiums to new customers in line with their renewal premiums doesn’t mean your current insurance company will be the cheapest — so it’s important to shop around for coverage.

As insurers can no longer attract new customers with reduced premiums, they may have to make their rates more competitive if they want to continue to increase their market share. This could mean that there are more savings to be made than ever before, making shopping vital.

James Dalton of the ABI said: “While the FCA recognizes that these changes could lead to higher prices for some who shop regularly, all customers should get a fairer outcome in the competitive UK home and car insurance markets.”

How to get the best rate for car and home insurance

Despite the changes, two things are still true: first, a policy with the cheapest premiums isn’t necessarily the best policy for you, and second, a price comparison site is the easiest way to save money.

Auto and home insurance comparison services will show you the best rates available for the level of coverage you need, and it only takes a few minutes.

Paying your premium up front rather than in monthly installments will also earn you savings, since insurance companies charge interest on what is essentially a loan you get when you choose to spread out the payments.

If you are unable or unwilling to pay your premium up front, there are 0% purchase credit cards that will allow you to spread out the cost – but the cards available to you will depend on your circumstances.

Voluntarily increasing the amount you are willing to pay in addition to the cost of any claim can lower your premiums. Remember, however, that this is on top of your mandatory trust increase, so you should be prepared to pay it if you need to file a claim.

In other words, make sure that the total surplus is on hand.

It’s possible to save money by taking a less comprehensive type of coverage, such as third-party, fire and theft coverage, but you don’t have to sacrifice enough protection for a chance to save a few pounds. You could end up being a faulty economy if you need to file a claim and find yourself uninsured.

Finally, consider the additional features you need that you can give up to save money. For example, you may not need coverage for personal belongings on your home contents policy if you already have mobile phone insurance or a hardware insurance policy that offers the same type of protection.