Can you beat rising insurance premiums?

From January 2022, UK insurers will be banned from offering lower prices to new buyers for home and car insurance.

As a result, customers who regularly switch insurers may find that bills are more expensive when their existing contract expires.

Here we explain what the new rules mean and whether there is a way to beat rising insurance premiums.

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Have insurance premiums gone up?

From January 2022, existing customers renewing their home or car insurance will pay no more than new customers.

The changes, brought in by the Financial Conduct Authority (FCA), are designed to remove penalties for customers who are loyal to one company.

The reforms follow an FCA review which found many insurers were increasing premiums for existing customers year on year. New customers are attracted by introductory offers at discounted rates, but those rates would increase if they renewed their policy with the same provider annually.

FCA’s changes mean prices for new customers looking for car, motorbike, van and home insurance are likely to rise and savings from switching are likely to decrease.

Having said that, insurance premiums for home and auto insurance have been falling steadily since the start of the coronavirus pandemic in early 2020.

That’s because various lockdowns and the increasing number of people working from home have led to fewer home burglaries and people driving less.

For more ways to cut costs, see how to cut household bills.

How to lower your insurance premiums

To get the best deal for your home and car insurance, it’s important to shop around and compare quotes online using a quote comparison tool – we’ve got one here on the Times Money Mentor website. Others include Confused.com*, GoCompare and MoneySupermarket.

It’s worth checking multiple comparison sites as not all insurers appear on each.

The best time to look for a new policy is about three weeks before your current policy expires. Leaving it to the last minute could cost you twice as much, according to consumer website MoneySavingExpert.

For other ways to lower your insurance premiums, follow the tips below.

Five tips how reduce home insurance premiums

There are many things you can do to lower your home insurance premiums. Here are five tips:

1. Annual payment: You’ll often get a reduction for paying your annual bill in one lump sum, rather than splitting the cost monthly via direct debit.
2. Combine your policies: A policy that covers both buildings and contents insurance is often cheaper than taking out separate policies. The average cost of a combined home insurance policy is £138.75, according to the MoneySupermarket Price Index. This compares to an average price of £110.38 for buildings insurance and £55.84 for contents insurance (£166.22 in total).
3. Use your discount without complaints: If you don’t make any claims, your annual premiums should drop over time.
4. Cashback offers: Cashback websites such as TopCashback and Quidco offer cashback if you buy a policy through their website, whether you use a price comparison website or buy directly from the insurer.
5. Do not overpay: Calculate the rough value of all your belongings and be aware that building insurance will only cover the cost of rebuilding your home, which may or may not be less than the property’s market value.

Other cost-cutting tips:

• Install a burglar alarm. Insurers may think that your property is less likely to be broken into if you have an alarm.
• Have a safe. Keeping valuables locked away means they are less likely to be stolen.
• Install security lighting. Outdoor lighting can deter burglars because it makes the space more visible.
• Insulate water pipes. Water is a common cause of property damage. Insulating water pipes means they are less likely to freeze and burst. Find out if your home needs flood insurance here.

Will insurance cover me if I work from home? Here we explain the rules of working from home.

Eight ways to beat car insurance price hikes

As above, there are also many ways in which you can reduce your car insurance costs. Here are eight tips:

1. Shop around: Compare policies using this handy comparison tool, plus at least one other comparison website to find the best deals. You can also consider using an insurance broker to compare the entire market.
2. Annual payment: You’ll often get a reduction for a one-time payment rather than a monthly one.
3. Increase your surplus: This is the amount you pay for any damage before your insurer covers the rest. Increasing your excess will mean you pay more in the event of a claim. But it will mean you pay cheaper premiums, so you’ll save money by not making a claim.
4. Add responsible driver: Adding another driver to your policy who is older and more experienced could lower your costs. This is because insurers assume that you will spend less time behind the wheel, making it less likely that you will have an accident and make a claim.
5. Cashback offers: As above, cashback sites such as TopCashback and Quidco offer cashback when buying car insurance through their website.
6. Bargain with your current insurer: Call your service provider to see if they can offer a discount or compare a price that can be found elsewhere.
7. See all rules: Consider comprehensive and third-party insurance as well. Comprehensive covers damage to your own car in the event of an accident, while third party only covers damage to other cars. It is often assumed that a third party is cheaper, but this is not always the case as insurers may consider you a more responsible driver if you regularly choose a comprehensive policy.
8. Telematics: A telematics device installed in your vehicle can reduce the cost of your premiums (see below).

For more on car savings, find out how this reader saved £6,000 on his Audi and £730 on his car insurance.

Can telematics lower car insurance premiums?

A telematics device – also known as a black box – allows insurers to get a clearer picture of your driving habits. They can then adjust your premiums based on your driving.

The device is similar in size to a mobile phone and will be placed somewhere discreet in your car. Once installed and activated, it will record data such as:

• When you drive – you are more likely to be involved in an accident at night or during rush hour.
• Where you drive – do you mostly stick to quieter roads or do you regularly drive on highways.
• How fast you goand how you manage speed limits.
• How do you drive? – for example, how you steer and take turns.

So if you drive safely, a black box can prove to insurers that you are a reliable driver who is less likely to be involved in an accident. Your premiums may then drop when you come to renew or take out a new policy.

On the other hand, it can backfire if you don’t drive sensibly and follow the rules set by your insurer (some insurers penalize you for driving at night).

A black box insurance policy is usually best for young and inexperienced drivers who have not received a no-claims discount.

A typical under-25 driver saves £223 a year on car insurance by using telematics, according to MoneySupermarket.

Can a smart home reduce my home insurance premium?

A ‘smart home’ includes a series of devices that are connected to each other and to the Internet, allowing you to control them remotely. These devices can include video cameras, motion sensors, smart lights, and door or window sensors.

The idea is that you can control these devices remotely, via a smartphone or tablet. You will also receive a notification when one of the devices is activated.

For example:

• Window sensors mean you’ll be alerted if someone tries to open a window while you’re away.
• Smart lights mean you can program the lights to turn on and off while you’re away, giving the impression that someone is home.
• Smart locks allow you to remotely control access to your front door. For example, you might want to give access to a family member while you’re out.

A smart home security system should make your home safer and ideally lower your insurance premiums.

But the use of smart devices in UK households is still relatively low, and most insurers do not currently offer discounted smart device premiums.

And if something goes wrong with your smart system, you might find yourself rejected. For example, if you don’t use your smart lock correctly and accidentally let a burglar into your home, your insurer will likely reject the claim as they would treat it as a door that was left unlocked.

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