Insurance

Third-party insurance holders pay more money for less cover

UK drivers with such policies are being charged thousands more than those with fully comprehensive cover, even though they offer less protection

A car drives clockwise along the M25, as anti-clockwise traffic is at a standstill after heavy rain. November 14, 2014. REUTERS/Peter Nicholls
A car drives clockwise along the M25, as anti-clockwise traffic is at a standstill after heavy rain. November 14, 2014. REUTERS/Peter Nicholls

Drivers are being warned not to assume that third-party insurance will be the cheapest option after research by Guardian Money found they were being quoted up to £4,000 a year more for policies that offer less cover than fully comprehensive plans.

Around nine in 10 drivers choose comprehensive motor insurance because it offers the best level of protection against injury or financial loss for the policyholder, their passengers and for third parties. The rest buy lower-level, third-party cover. But while those policies offer less protection and will not pay out if, for example, the policyholder’s vehicle is damaged, drivers are frequently charged more for them.

Third-party quotes obtained by the Guardian using comparison websites Uswitch.com, Comparethemarket.com and Confused.com, and from the UK’s biggest insurer Aviva, were all more expensive than fully comprehensive insurance.

In the case of a 20-year-old mechanic living in south-east London and driving a 1.6 litre Ford Focus, the gulf between the cheapest policies available was vast. While the best third-party quote on Comparethemarket.com was £5,762 a year from GO Girl, if the same driver opted for comprehensive cover they would pay just £1,531 with a More Than Smart Wheels telematics policy, where a black box is fitted to the car.

Across seven age groups, ranging from 20 to 80, only a 40-year-old Toyota Yaris driver from Coldstream in Scotland got a cheaper quote through Confused.com for the middle level of insurance – third party, fire and theft cover – than for a comprehensive policy. In this instance, buying superior comprehensive insurance would cost the policyholder an extra £15 a year.

On Comparethemarket.com, third-party cover was more expensive than fully comprehensive insurance in each of the scenarios, but third party, fire and theft proved cheaper in three of the seven cases. The biggest saving for buying less cover insurance was £32 a year for a policy covering a 70-year-old Ford Ka driver from Swindon.

Martin Lewis, the founder of MoneySavingExpert, said: “There are probably hundreds of millions of pounds being wasted by people thinking third-party insurance is cheaper. The golden rule is if you’re only looking for the cheapest policy full stop, don’t just look at third party, get comprehensive quotes as well.”
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Insurers said premiums were higher on third-party policies because people taking them out were more likely to make a claim, and to claim higher amounts. Many of them do not have a choice but to take this type of cover.

A spokesman for the consumer group Which? said: “The car insurance market is large enough for most drivers to find comprehensive cover should they want it. However, some insurers may decide to only offer third-party cover to drivers in certain circumstances, including for younger motorists or those with driving convictions.”

Premiums are also pushed up because there is less competition in the third-party market. In our search for quotes for fully comprehensive cover, Confused.com returned 37 results for an 80-year-old and 60 for a 50-year-old driver. By contrast, there were just 20 results for an 80-year-old searching for third-party cover and 31 for a 60-year-old.

The UK’s biggest car insurer, Aviva, provided a third party, fire and theft quote for the 20-year-old Ford Focus driver, but not for any of the other six motorists from different age groups. Aviva said: “We don’t allow vehicles over £5,000 in value on third party, fire and theft cover – the reason for this is we feel that a customer with a car worth more than £5,000 would want their vehicle repaired in the event of an accident.”

Despite the low level of third-party policies being offered and sold, it appears this type of insurance will not be disappearing any time soon. Rod Jones from uSwitch.com said: “There will always be a market for third party as some consumers will persist in searching exclusively for it, and for some insurers the loss ratio will be acceptable to make it worth offering.”

Some comparison sites already include features that make it easier to see a comprehensive quote. These include preselecting comprehensive on the quote generation pages, and making it easy to switch between different levels of cover on the results page.

All drivers have access to car insurance, as Pam Quinn of the British Insurance Brokers Association, said: “There is always a choice, but if you are confused about the insurance options available to you speak to a broker, rather than leaping in and buying an expensive and perhaps unsuitable policy.”

The Guardian

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