Car insurance: are you being taken for a ride?

Published by Dan Moore on 14 May 2018.
Last updated on 14 May 2018

Car insurance: are you being taken for a ride?

Paying a voluntary excess can reduce your premium – but not in all cases. Here’s what you need to know when you’re shopping around for a policy.

Agreeing to pay towards the cost of your car’s repair in the event of a claim might seem absurd, given the whole point of paying motor insurance is to have someone else pick up the bill.

However, many of us do, thanks to the excess attached to most motor insurance policies. This is an amount that you agree to pay towards the repair of your vehicle, a common way to help reduce your insurance premium. At least that’s the plan. Moneywise investigates.

Voluntary excess box

Most price comparison websites include a question in the quote generation process asking how much ‘voluntary excess’ you are willing to pay. It’s easy to conclude that your voluntary excess is all you will need to pay towards the claim, but this isn’t necessarily so.

Scrutinise the final results page and you will see a ‘total excess’ figure, stating your contribution plus the insurer’s compulsory excess. So where you may have ticked the £250 voluntary excess box, when it comes to making a claim you could find yourself required to pay much more.

We ran a number of scenarios through a price comparison site to test how voluntary excess levels affect premiums. We looked at what a 30-year-old and a 50-year-old Ford Focus driver living in Aberystwyth, Leeds, and south London would pay for comprehensive insurance. Our drivers each ran quotes on the basis that they would pay a voluntary excess of £0, £250 or £500.

Excessive excesses

 In some of our scenarios, the total excess outstrips the cost of the policy. For example, our 50-yearold driver from Aberystwyth secured a quote for £268 after opting for a £250 voluntary excess.  However, after the compulsory excess is added to this Saga policy, the total excess would be £400, which is £132 more than the policy premium.

In other cases, the second-best quote would end up a stronger deal. If our 50-year-old from London opted for the second-best £0 voluntary excess quote, which cost an extra £3, they would have a £100 total excess rather than £150.

It’s even worse for our 50-yearold driver from Leeds who opted for a £500 voluntary excess to secure a lower annual premium. If this driver had paid just £16 more for a Privilege policy, they would be liable for the first £600 of any claim instead of £745, thanks to the difference in the total excess.

Higher excess, lower cost?

Agreeing to pay a voluntary excess should lead to a lower annual premium. However, in some cases the opposite happens. In the case of our 50-year-old Leeds-based motorist, opting for a policy with a £500 voluntary excess would cost £495, whereas they would pay £1 less if they opted for a £250 voluntary excess. In both cases the driver would also face a compulsory excess, bringing the total they’d be required to pay to £745 and £495 respectively.

It’s a different matter for our 30-year-old Welsh driver. In this case, the cheapest quote with a £500 voluntary excess bolted on was £503. If they had selected a £0 voluntary excess they would save £37 and only be liable for only the first £195 of a claim.

Click on the table below for the full findings of our insurance investigation.

 

A spokesperson for insurer Hastings, which offered some of the policies we looked at, told us: “In most cases, selecting a higher voluntary excess will lower the insurance premium. However, the effect the voluntary excess has on the insurance premium can vary based on the information provided during the quote process about the driver and vehicle.”

Malcolm Tarling, chief spokesperson for trade body the Association of British Insurers, echoed this view, adding: “Someone paying something close to the average premium will potentially not see a major saving. But the excess can have more of an impact on customers with certain types of vehicle.”

 Meanwhile, Lee Griffin, founder of comparison website GoCompare, believes the odds of getting a lower quote after selecting a higher voluntary excess are unlikely: “It could happen if the customer changes details when getting a quote. But this may be interpreted by some insurers as an attempt to manipulate the quote process, and they will therefore not provide a quote.”

Comparison site wording

Given the confusion about excesses, we also looked at how the five main comparison sites – Compare the Market, Confused, GoCompare, MoneySupermarket and uSwitch – describe ‘voluntary excess’ within the quote-generation process.

 Comparethemarket.com’s advice box offers one of the clearest explanations of voluntary excess. After highlighting the benefits, it points out insurers may apply additional excesses, such as for young or inexperienced drivers.  It adds that policyholders will pay the combined total excess in the extent of a claim.

Confused.com invites site visitors to set their voluntary excess, offering the choice of ‘£250’ and ‘Other’, the latter opening up more amount options. When you click on either box, a help box opens, explaining the benefits. However, there is no reference to the compulsory excess and that this would be added to your voluntary excess.

Gocompare.com has information boxes that appear when you hover your mouse over the relevant section. The voluntary excess box explains the benefit of paying towards a claim and makes it clear that this is in addition to a compulsory excess.

Moneysupermarket.com takes a different approach to many of the other comparison sites as it doesn’t ask about this issue before the results page. At this point, quotes are ranked in price order, with the cheapest first and an excess column following the premium. It shows the voluntary excess, set to £250, then the compulsory excess, and finally the total. Visitors can change the voluntary excess amount via a panel at the top of the page.

The information panel on uSwitch.com offers a clear and complete explanation. It states: “A voluntary excess is an amount you will have to pay upfront if you make a claim. Increasing the voluntary excess will often give you a cheaper premium, but it can also have little or no effect on quotes – try varying excess levels to see how much your quote changes.

“It’s worth bearing in mind that if you choose to pay a large voluntary excess, it could leave you unable to afford to make a claim.”

Total excess

The comparison sites may go to some pains to explain what a voluntary excess is and why we should consider one, even going so far as to point out that it’s worth playing around with the amount to see how this affects quotes. But what none explains is why they don’t just do away with the voluntary excess box and replace it with a total excess box, with the amount repeated alongside the premium on the results page.

Lee Griffin of GoCompare explains why this isn’t possible: “All comparison sites would love to be able to put a total excess on our pages rather than a voluntary excess, but we can’t. Insurers don’t have a fixed compulsory excess on their policies that we can refer to. The amount you are quoted from them depends on certain factors, and we are not privy to the algorithms they use to arrive at a particular excess.

“All we can do is to offer people the chance to select a voluntary excess that may help lower their premium.”

Repair and declare?

While the point of insurance is to cover loss, the scale of a potential claim is a very important factor. A write-off will invariably far exceed whatever excess you would contribute, yet some of the most  common claims for damage may not. So where does this leave you? According to car body specialist Car Cosmetics, it typically costs between £300 and £700 for a straightforward car part replacement. However, even for a ding, if other systems associated with the bumper, such as sensors, are damaged, the average costs rise to around £600 to £1,300, including labour.

Mr Tarling acknowledges that many people will not go through their insurer if they can fi x it for less than their excess and keep their no claims discount (NCD) intact as well. But he also suggests that if your insurer requires you to inform it of any incident, a common insurance clause, this is nothing to worry about.

“You may have an incident logged, which is important for fraud prevention, especially if someone else is involved too, but most insurers do not increase the premium where there is no claim made,” he says.   

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