Money: It's always better to call for cheaper insurance

THE PROSPECT of cheaper motor insurance for hundreds of thousands of drivers, for one year at least, was raised this week by Barclays, which announced a deal whereby it promises to undercut the cost of any renewal premiums offered by any other insurer.

Barclays says the deal applies to any motorist, driving any car, with any previous driving history.

The deal is jointly offered with Privilege Insurance, the telephone service largely owned by Royal Bank of Scotland, together with Peter Wood, the multi-millionaire founder of Direct Line, which revolutionised the UK insurance market. It offers savings to many policyholders, particularly those who face sharply increased costs when they come to renew their premiums.

The potential market for the joint Barclays/Privilege venture is huge. Research indicates that motor insurance is a "grudge purchase". Policyholders know that they can probably obtain a better deal from another insurer. But they don't like making the phone calls to find it and usually "do the rounds" only every two or three years. Many insurers take advantage of this. They will deliberately quote a low price to first-time policyholders in the hope that, at the end of the first year, those who have taken the bait will simply stay with them for another year or two at worst, indefinitely at best. Meanwhile, their premiums go up.

By short-circuiting this cozy arrangement, Barclays offers hope to many policyholders who want a cheaper premium, but don't want the hassle of five or six calls to find it.

There are, however, some catches. First, the offer of a cheaper deal relates solely to the renewal premium on offer from the previous insurer. There may be cheaper deals available elsewhere on the market. Second, the guarantee to undercut the opposition applies only for one year. Thereafter, says Barclays, it will only offer "competitive" premiums to all those whose policies it has vacuumed up this year.

The lesson for all policyholders, however unpalatable, is that if they really do want to save on the cost of their motor insurance, the only way is to make those calls every year, not just every two or three. The savings can be substantial, despite the aggravation of doing so.

For anyone who does opt for the Barclays deal, the same lesson applies - with even greater force at the end of the initial 12-month period, after which, if past history teaches us anything, premiums will then revert back on an upward course.