Take a look at the motor insurance you just bought. It says 'comprehens ive'. But is it?

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The Independent Online
W hy do sensible shoppers seemingly throw caution to the wind when buying motor insurance? For most people this is one of their most significant annual outlays, yet many hunt for the cheapest offer, assuming all motor policies are identical in every respect bar price.

Tempted by advertisements promising to save pounds, motorists will ring round for quotations, without stopping to consider policy cover or claims service.

Motor policies are not the same, not even fully comprehensive policies. The standard of service at the time of a claim can differ from one insurer to another.

There is no point in buying a cheap policy only to discover, when a claim occurs, that you do not have the cover which you thought you had, or that your insurer, who was so keen to take your premium, is not so keen to part with money for a claim.

Unfortunately, few people actually question telesales staff as to precisely what the policy does cover, and what it does not.

Ten years ago the ability to find the cheapest quotation in the market was limited. But today, thanks to new technology, over 100 different motor schemes can be checked in less time than it used to take to check a single one.

The computer can generate the proposal forms and all the client has to do is to sign and date the document.

This ability to handle larger volumes of inquiries has led to the growth of telesales operations and the motorist has been encouraged to shop around for the cheapest quotations.

It is now a simple process for a broker to find the insurer offering the lowest rate for a given risk. Insurers have to be competitive on brokers' quotation systems if they are to attract business.

Similarly, direct insurers have to ensure consistently competitive rates against the broker market if they are to attract and, more importantly, retain business.

This competition has benefited the motorist. Premiums have fallen on average by about 15 per cent in the last 12 months and as a result the insurers have been compelled to become more efficient.

It is not all good news, however. Having made it so easy for customers to change insurers, the percentage of those renewing with their existing insurers has fallen.

To combat this loss, insurers have to attract increasing numbers of new clients and incur considerable expenditure in both marketing and quotation costs. Some insurers find that they are having to provide as many as 10 quotations for every one risk that is accepted.

These increased costs are ultimately funded by the motorist - and primarily by those who never change insurers.

To look at it another way: if motorists stopped shopping around for cheaper insurance, insurers' overheads and therefore all premiums should actually fall.

The need for insurers to improve the number of accepted quotations has seen two worrying developments.

In order to achieve cheaper premiums some companies now offer comprehensive policies with reduced cover.

For example, the policy may not include personal accident, medical, contents, radio or car window cover. Such policies may well be suited to some, but the danger is that these contracts are still sold as comprehensive policies - without the limitations being explained.

It is too late to find out, following a claim, what a small saving in premium has cost in real terms; or that for a similar premium a policy offering conventional comprehensive cover could have been secured. The practice of marketing these policies as comprehensive should be ended.

The second concern relates to excesses. This is the term used for the amount that the insured motorist has to pay personally in the event of a claim.

There are two types of excess. A voluntary excess, where the client can secure a reduction in premium by agreeing to pay, for example, "the first pounds 100" of any claim, and a compulsory excess, demanded by the insurer to reduce the risk. Both should clearly be identified to the client at the quotation stage.

Regrettably, this is not always so in the case of compulsory excesses, where the excess is part of the basic policy wording. This is often the case with the direct market, where a compulsory excess of pounds 250 or more is quite common.

These excesses enable insurers to offer lower premiums, which the motorist may then compare to premiums for policies without an excess, not realising they are not like-for-like.

Any excess applicable under a policy should always be indicated to customers prior to their acceptance of the cover.

Purchasing motor insurance is not, therefore, simply a matter of finding the cheapest deal. You may well find a direct insurer offering favourable rates and cover but check also with a registered broker.

In the time it takes direct insurers to quote their single product to you, a broker will have checked numerous schemes and be able to provide professional independent advice on the most suitable product for your individual needs.

The broker can do this and still be competitive with the direct market.

Nigel Richardson is Motor Schemes Manager at RAC Insurance.

The Independent is introducing a Motor Insurance Question and Answer service for readers, which will be provided by RAC Insurance Services. If you have any queries please write to "Motor Insurance Q&A" c/o the Independent, One Canada Square, Canary Wharf, London E14 5DL. Answers will be published every four weeks. Unfortunately we cannot intervene in existing disputes or return documents.

Don't

Seize the first, or the lowest quote you can find without asking what exactly the cover is. Is it really comprehensive, or are there specific exclusions? Is there a compulsory excess you must pay in the case of a claim? Does the policy cover legal costs if you have to fight your claim?

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