Martin Lewis has warned drivers over a "ridiculous rule" that could see them pay double the price for their car insurance.
The MoneySavingExpert.com founder revealed the rule on a recent appearance on ITV's Tonight Programme. He explained how insurance firms will charge motorists more the later they leave their renewal as this would bump up their "actuarial risk” - this means they are considered more of a risk when on the road.
According to Martin, drivers who leave renewing to the last minute could potentially be charged 100% more than those who sorted it out earlier. Securing a new deal weeks before an existing contract ends will likely show a driver is less rushed and could even pay off with better premium prices. So the later you leave it, the more you could be charged for your yearly renewal.
Martin said: "It seems absolutely ridiculous but insurance pricing is all about actuarial risk and what their risk shows them is the type of people who get car insurance early are a lower risk so they give them a lower price. You might pay nearly double if you wait until the last minute to get your car insurance.” Alongside this, Martin also revealed the ideal time motorists should renew their policy to secure the cheapest agreement.
Martin explained: “The perfect time to get car insurance is 23 days before your renewal. That’s not for your renewal quote, that’s for going onto comparisons to get different quotes. It seems absolutely ridiculous but insurance pricing is all about actuarial risk. And what their risk shows them is the type of people who get car insurance early are a lower risk so they give them a lower price. You might pay nearly double if you wait until the last minute to get your car insurance.”
Martin Lewis' MSE has analysed around 70million car insurance quotes across a range of comparison sites and found the average quote made on the renewal day was £1,198. However, those who renewed just 23 days earlier could see a price of just £694 - a difference of £504.
If you miss the 23-day deadline, you shouldn't worry too much as motoring experts at MoneySuperMarket say you could also secure a better policy if you renew between 15 and 29 days. Leaving it any later, you're almost guaranteed to see a substantial rise in the price you'll have to pay so you should make
The MoneySuperMarket website explained: “According to our research, car insurance premiums start to go up within two weeks of your current policy ending, and the sharpest rise comes around three days before. So as long as you buy before then, you should avoid the big price hike reserved for those who leave it until the last minute.”