Too many car insurers are offering policies that represent poor value for money, while the growth of a so-called budget-friendly “essentials” policies could leave motorists without cover for common claims, research by the consumer champion Which? is warning.
After surveying more than 60 policies offered by 28 insurers it said consumers should check the smallprint of their policies after finding “concerning gaps which could leave motorists high and dry” should they need to make common claims.
These included chipped windscreens, the second-most common kind of claim drivers make on their insurance after accidental damage.
It survey of nearly 2,800 insurance policy holders found NFU Mutual was the top car insurance provider both in terms of customer service and value for money, followed by LV. Lloyds was rated the lowest provider.
The findings come as figures released by the Association of British Insurers (ABI) show that on average motor cover was 25 per cent more expensive in 2023 than the previous year.
Motorists face average costs of nearly £1,000 for car insurance – the highest price recorded in the UK, according to data from Compare the Market.
Premiums have risen £366 on average – a 52 per cent year-on-year increase – to a typical price of £995. Young drivers have been particularly hard hit with their premiums rising £655 in the past 12 months to £2,002.
Rocio Concha, of Which? warned drivers needed to check the smallprint of their insurance contracts closely to avoid being left high and dry.
“You can’t be on the road legally unless you have car insurance, but with premiums at eye-watering levels, many motorists are being pushed towards stripped-back policies.
“Our research shows that some basic policies lack cover for common claims, meaning that a cracked windscreen could leave some drivers facing hefty repair bills”
Which? said insurance firms have been required to provide fair value since January 2022, requirements reinforced by the Consumer Duty last year.
It said it was concerned about how customers who pay monthly for their premiums may be being ripped off compared to those paying annually and called for the watchdog Financial Conduct Authority to make sure firms are providing fair value in the interest rates they are charging customers.
The consumer group also said insurance firms needed to be certain their products meet the needs of their customers and that customers properly understood the information they are given and make informed choices.
“Given the high rates of claims for issues such as glass damage which some policies do not cover, Which? wants the FCA to make sure firms selling products with major exclusions are evidencing that their customers understand the risks they are taking in opting for these policies,” a spokesman said.
Last week, the ABI said it is investgating way to help tackle the rising cost of car insurance, including introducing greater transparency around which cars were more expensive to insuren.
More expensive repair costs, delays in replacement parts because of supply chain issues, dearer car replacement costs as well as wider inflation had all contributed to the rising cost of car insurance cover it said.
The ABI is also campaigning against the Treasury imposed insurance premium tax (IPT), saying it added £67 to the average policy. IPT is a tax on insurers which is usually passed on to customer.
The ABI said: “Our members fully understand the importance of providing fair value to customers and work hard to deliver it. Our data shows 97 per cent of private motor insurance claims are accepted, and the average claim is over £4,000.”
It said insurers are helping people stay on the road.
