Big excess won’t cut insurance cost, drivers warned

Big excess won’t cut insurance cost, drivers warned

No policy price difference between £500 and £1000 excess

INSURERS HAVE been accused of ripping off motorists by allowing large excesses on car insurance without offering any savings on the premium.

Research has found that there is no difference in the cost of policies that have excesses of £500 and those that have excesses of £1,000.

In the event of an accident, car owners have to cover the cost of repairs up to the level of the excess. Many drivers assume that opting for a higher excess results in a cheaper quote.

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However, the study found that increasing the excess from £250 to £1,000 shaved only £12 off the cost of policies on average.

An estimated 16 million drivers choose an excess of between £250 and £1,000, meaning that they are taking on up to £750 of potential extra liability for savings of as little as £1 a month.

As one in ten drivers makes an insurance claim each year, that means that 1.6 million people could be left significantly out of pocket by this pricing structure, the study concluded.

Rod Jones, insurance expert at, the comparison website that conducted the study, said: “Drivers should ask themselves if the additional risk is worth the saving and would they be put off making a claim knowing they would have to pay a significant sum for doing so?

“With so many people making a car insurance claim each year, we urge those looking to renew or switch their cover to think seriously about the level of risk they want to take financially before they commit to a new annual policy.”

The study found that the average annual car insurance policy with no excess costs £368, falling to £330 with a £250 excess.

The average cost of a policy with a £500 excess was £318, exactly the same as the average policy bearing a £1,000 excess.

The cost of car insurance has increased by more than a quarter over the past three years.

Insurers say that one of the reasons higher excesses might not offer bigger discounts is because they apply only to damage claims made by the policy-holder and the largest payouts are for third-party bodily injury claims, where excesses are not applied.

Malcolm Tarling, of the British Association of Insurers, said: “Motor insurance is a very competitive market. It is important to compare the benefits provided by different policies, including the impact of any voluntary higher excess on your premium.”

Recently, it emerged that one of Britain’s biggest car insurers increased premiums for drivers who applied using a Hotmail account. Admiral said that some domain names were “associated with more accidents” than others, raising applicants’ risk profile.

James Daley, of the campaign group Fairer Finance, said: “Competition drives low prices for a select group of people who can fit themselves into the right boxes. Meanwhile the rest of us pay higher premiums to subsidise the lucky ones. A full review of how insurers calculate pricing is well overdue.”

Andrew Ellson

This article first appeared in The Times

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