The Biggest Car-Insurance Con
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Ever hear of fraudster Emil Savundra, his Fire, Auto & Marine Insurance Company (FAMIC), and his famous ‘trial by television' at the hands of David Frost? These events took place in 1967, so few people under the age of forty will be familiar with this scandal.
Insurance fraud on a grand scale
"Dr" Savundra was a born swindler who committed fraud in several countries. In 1963, he founded insurance company FAMIC, which offered extremely competitive premiums to British motorists. Alas, FAMIC's insurance policies turned out to be worthless, as it was all-but-impossible to make a successful claim.
In 1967, Savundra shot himself in the foot by describing policyholders as ‘peasants' on BBC Television chat show The Frost Programme and claiming that he was not responsible for problems at FAMIC. He was imprisoned a year later.
The collapse of FAMIC left 400,000 motorists without insurance cover. Thus, 41 years later, there is still a slight spike in motor-insurance renewals around the anniversary of FAMIC's failure.
One con that goes on
Of course, the insurance industry is far better regulated today than it was forty years ago, thanks to the creation of the Financial Services Authority. Nevertheless, many insurers still view their customers as sheep waiting to be fleeced. The most common trick is to favour new customers, while giving loyal policyholders a raw deal.
For example, a month ago, in The Easiest Car-Insurance Trick, I wrote about my wife's renewal quote for her motor insurance. Her insurer casually jacked up her premium by 10% from £274 to £302. According to The AA's British Insurance Premium Index, car-insurance premiums have gone up by an average of 6% over the past year.
Therefore, my wife telephoned her insurer to query this above-average premium hike. Predictably, it backed down. In order to keep her custom, it offered to increase her premium by a mere £1, or 0.5%. That's more like it.
Clearly, my previous article struck a chord with Fool readers, as I had a flood of feedback...
What you told us about car insurance
Readers are particularly annoyed when insurers ‘try it on'. We don't like the ‘assumptive' approach used by insurance companies. This is along the lines of: "We will automatically renew your policy with this higher premium, unless you cancel beforehand." For example:
- One reader objected when her motor insurer tried to raise her yearly premium by nearly a third (32%). Using the Fool's car insurance service, she managed to secure an incredible 65% reduction from her renewal quote. That's some saving!
- One reader always shops around and then calls back his existing insurer, asking it to match his best quote. To him, this is the best of both worlds: a lower premium and no extra form-filling.
- Fool fan Margaret received a renewal notice for £311. Having found a quote online for £271 (a saving of £40), she telephoned her insurer. It refused to match her best quote. However, she got a new quote from its website. Coincidentally, this came in at £271 -- exactly the same as her target premium. A complaint to the company led to it agreeing to honour the online quote of £271.
- Gill was annoyed to learn that her insurer would automatically collect her premium from her credit card on the renewal date. Unhappy that it would do this without her permission, she decided not to renew. She then added herself to her husband's insurance policy at a much lower cost. Well done, Gill!
- Eddie has found an insurer which generally provides competitive quotes. However, he keeps it on its toes by always getting an online quote as if he were a new customer. Last year, this trick slashed his premium from £722 to £588 at a stroke. This year, the same process yielded a saving of £25, plus a reduction in his policy excess from £650 to £600. Nice work, Eddie!
- Kate always cancels her policy at renewal time and re-applies as if she were a new customer, often sticking with the same insurer. As well as checking online comparison services, she checks her insurer's website to see if she can lower her premium by going direct.
- Martin's wife had a fairly unusual experience, as her insurance premium actually fell on renewal. In 2006, she switched insurers, in order to reduce the premium from £164 to £140. When her renewal notice arrived last October, the premium had slipped to £125 -- a saving of £15, almost 10%. Although an additional year of no-claims discount helped, this renewal quote was clearly very competitive in order to keep her business, so she duly renewed her policy.
My thanks go to these (and many other) Fool readers who contacted me with feedback on their experiences of tracking down lower insurance premiums.
In summary, if you don't want to be taken for a ride, begin shopping around as soon as your renewal notice arrives. Once you've done so, go back to your existing insurer in order to give it the chance to match your best quote. As always, if you don't ask, you don't get!
More: Find quality quotes for car insurance | The Quest For Cheap Car Insurance | Don't Fall For These Car Insurance Tricks
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