Six lesser known things that affect your car and home insurance

The loyalty penalty is the technical term for being overcharged for being a customer who sticks with the same company.

It’s when firms in sectors from insurance to broadband to energy hit you with higher prices simply on the basis of “customer inertia” – reasoning that you’re too content to leave, don’t know what other deals are out there or don’t want the hassle of trying to find a new provider.

It’s exploitative and something that the insurance industry spent decades cashing in on – until last year.

In January 2022, the Financial Conduct Authority (FCA) finally banned the practice in the motor and home insurance sectors. It ruled that existing policyholders could no longer be quoted a higher price than the premium they would pay if they were a new customer.

This meant firms would no longer be able to raise premiums at renewal without good reason – perhaps a rise in crime in the area where you live, or your own driving record – and the FCA estimated that this would save consumers £4.2 billion in total over the next ten years.

However, since the new rules came into force, I’ve been contacted by readers who claim the cost of their insurance still increased at renewal, despite them not making any claims or reporting any incidents.

The FCA says it is monitoring this behaviour. But given that insurers don’t have to tell you how your premium is calculated, on the grounds of “commercial sensitivity”, it’s hard to know if you are getting a good deal.

Make a complaint if you think you are being overcharged. Shop around, compare prices and try signing up as a new customer to see if it is cheaper.

How comparison sites make money out of you

Amazon recently announced it was moving into insurance – or price comparisons, to be exact. That gives you a clue about how lucrative the comparison industry is. It is quite tight-lipped about its profits, but most estimates put the collective total at over £1 billion a year.

Comparison sites work by asking you a set of questions so insurers can give you rough quotes. As a rule, the longer the information-gathering process goes on, the more likely people are to give up, so comparison sites that are more thorough risk losing custom. However, the more questions you are asked, the more accurate the quote will be, and this will save you much more time in the long run.

It’s also worth noting insurers pay comparison sites anywhere from £30 to £50 per customer they source. So the industry is focused more on getting you to click through to the insurer – as opposed to giving you the most accurate quote.

See our car insurance guide and home insurance guide for advice on how to compare quotes.

Six lesser-known factors that affect your car and home insurance

There are a few obvious things that affect your premiums, from your postcode to the materials your home is constructed from. However, a number of other factors could also have a big impact on your final quote – here are six, and what you can do about them.

1. Don’t leave it until the final hour
   If you are thinking about searching for a cheaper deal, avoid leaving it until the last minute.
   For a start, the new provider will view you as a higher risk, and adjust your premiums accordingly. You will also be short of time for finding quotes to haggle with.
   It’s really easy to miss your insurance renewal date. So well before you start shopping around, dig out your policy and add the end date to your calendar.
   I’d also set an additional reminder for five weeks before the policy expires. This will give you time to shop around, find the best deal or even negotiate with your current insurer. We’ve got a handy car insurance comparison tool to help you find the best quotes.
2. Don’t rely on comparison sites
   No two comparison sites are the same, which is why searching for quotes can be complicated.
   For a start, some insurers don’t appear on any of them, while others have deals in place with different sites. This means you can get different quotes depending on which comparison site you are using.
   Bear in mind that the shorter the comparison site questionnaire, the further your quote is likely to be from reality.
3. Do the work before getting a quote
   One of the biggest sources of complaint that I see with home and contents policies is “wear and tear”. In this context, this means the repairs to your home that you probably should have got round to but didn’t.
   For example, your roof may be in need of new tiles, or your garden fence might be a bit rickety. If a storm comes along and makes the damage worse, you may find you are not covered in a claim.
4. Flood risks
   Thousands of people live in “uninsurable” locations due to repeated floods. As flood risks are mapped and evolve, it makes sense to check if you are affected before you apply for insurance.
   Even if you are a renter, you will need to know a bit about the structure of your building. For example, I live in a top-floor flat with a flat roof, which makes my property at risk of flood damage. This factor alone has a significant impact on my insurance premiums.
   Pop your postcode in here. If you are house hunting, it’s worth checking this during the viewings stage.
5. Be open about any makeovers
   If you’ve done up your home recently – from converting an attic to building a man cave shed in the garden – your insurance will go up as there’s more space to cover (and more things in it that can get damaged or stolen).
   If you are doing renovations, speak to your insurer to ensure your home is covered during the renovation period.
   Conversely, improving your wiring and safety features, and installing extra security, can reduce your premiums. Even a certain type of lock can make a difference.
6. You get what you pay for
   The way we live has changed dramatically in recent years. One of the biggest changes is that we tend to have many more valuables in our properties than before.
   It’s a bit of a faff, but take a little time to go round each room and price up the items that could cost you a significant amount to replace.
   Take photos of them and save these somewhere safe on your laptop or computer. Price everything up and factor this in when choosing the appropriate insurance policy limits.
   Trust me, if you need to make a claim, this will be invaluable. You will have to prove you own the items you are claiming for.

Read more: 11 secrets of cheap car insurance quotes