Urgent warning about insurance loophole that costs millions of drivers extra – how to avoid it
A LEGAL loophole means loyal drivers are being charged more than new customers for breakdown cover.
New regulations were introduced in January 2022 banning insurers from offering cheaper deals to new customers and hiking costs for existing ones.
However, they don’t apply to breakdown cover despite it being a form of insurance.
Marc Shoffman takes a look at how to get a fair deal on breakdown cover.
Unfair loophole
MILLIONS of motorists rely on breakdown cover to come to the rescue when they suffer flat batteries or punctures.
Car and home insurers are banned from charging existing customers higher premiums than new ones, but these rules don’t apply when buying breakdown cover directly from providers, including The AA or RAC.
Drivers have reported being charged more than 30 per cent extra to renew and in one case seen by The Sun, almost 70 per cent.
Firms try to woo customers by offering “member benefits”, such as discounts at restaurants or days out, but the deals may not be of value or relevance to everyone.
For example, The AA offers a 30-day Kids Pass that provides up to 50 per cent off attractions but this only costs £1 for a trial over the same period or £4.99 per month.
The AA also provides eyecare discounts at Vision Express but teachers and nurses can already access these.
Similarly, The RAC offers users 50 per cent off their first Moonpig card but VoucherCodes highlights similar discounts elsewhere.
Loyal customers face paying more to renew their policies whether they make use of the benefits or not.
Consumer expert Martyn James said it’s unfair that breakdown cover is exempt from the rules.
He said: “Most people would assume it applies to all insurance products.
“It’s loyal customers who are being penalised and insurers should remember that it’s not good practice to increase premiums in this way.”
The AA said: “The AA offers an exceptional breakdown service.
“Some discount partners may run offers, whether higher or lower, on their own sites and elsewhere, but this is not within The AA’s control.
“The terms and conditions for each smart benefit are outlined.”
What cover do you need?
CONSIDER your driving habits to avoid paying over the odds.
The cheapest policies offer “roadside assistance” only, which is where a mechanic will try to fix your car if you break down more than a certain distance from home, typically a quarter of a mile, or tow it to a nearby garage.
If you want assistance when your car breaks down at home, or in the local area, you will need a “home start” policy.
For drivers who travel long distances, you might need a policy that offers “national recovery”, which means you get the same level of service wherever you are in the UK.
Look for cover that provides help with onward travel, for example paying for train tickets or courtesy car. Home start and national recovery policies typically range between £30 and £130. Some insurers offer both services for the same price, while others charge more for one than the other.
Ryan Fulthorpe, of Go Compare, said: “A joint policy with your partner can also work out cheaper than two separate policies.”
Some fee-charging bank accounts include car breakdown policies, so check if you are already covered.
Does car insurance cover you?
BREAKDOWN cover is included in some car insurance policies – and it can also be offered as an extra.
Julie Daniels, of Compare The Market, said: “Some insurance providers advertise free breakdown cover with their policies. However, you might find that the overall price of your insurance premium is higher as a result.”
She also urges drivers to check the small print, as a free policy usually only provides a basic level of cover and you may have to pay extra for home start or national recovery.
Do the maths yourself and work out the cheapest way of paying for the cover based on your situation.
If you can afford it, pay the renewal amount upfront.
Providers will offer you the option to pay monthly, but this will be the most expensive way as they will add interest.
Haggle down costs
DON’T be afraid to switch or haggle down your bill.
Consumer expert Sue Hayward urges people to do their research before phoning.
She said: “I always press the ‘thinking of leaving us’ option when I call up.
“I say I love the service but it’s far too expensive. They usually offer a discount.
“Before I call I check what the new member deal is then ask why I am paying more.”
The RAC and the AA argue that loyal customers benefit from extra perks from sticking with them.
For example, AA customers get free cover for children when travelling with other family members.
They also ask customers to check if their level of cover is appropriate before renewing.
Under Financial Conduct Authority insurance rules, companies must send renewal letters to customers that show the new price and what they paid the previous year.
Check for exclusions
LOOK out for exclusions in the policy such as callout limits per year or clauses where you have to inform the mechanic if you have a pet in your car.
There may also be issues if you are towing a caravan, trailer or other vehicle.
Standard policies generally do not cover this so you may need a specialist one.
And not all policies will help you if you have to change a flat tyre.
'WE CHALLENGED RENEWAL AND THEY KNOCKED £60 OFF'
DEBBIE Porter saved £60 by haggling down her breakdown cover at renewal.
She has been an AA customer for 15 years and had reached silver membership, giving her access to perks including free European breakdown cover three times a year and restaurant discounts.
In January, her policy went up from £159.16 to £268.14 at renewal, a 68 per cent rise.
Debbie, 50, who lives in the Peak District, and is managing director of marketing firm Destination Digital, said: “We challenged them and said, ‘Why don’t we go to the RAC for a first year discount?’.
“At that point they dropped the price by £60 straight away.
“The renewal quote was on the back of my letter. I easily could have missed it.”