Get in the fast lane for cheap car cover

As more and more insurers enter the market, premiums are being driven down. Sam Dunn shows how to find the right policy

They've waged price wars in the battle for supremacy on Britain's high streets and now retailers such as Marks & Spencer, Tesco and J Sainsbury are trying to conquer a new territory by driving down the cost of car insurance.

They've waged price wars in the battle for supremacy on Britain's high streets and now retailers such as Marks & Spencer, Tesco and J Sainsbury are trying to conquer a new territory by driving down the cost of car insurance.

Research from Confused.com, a website that enables consumers to compare premiums on motor insurance, shows the average cost of a policy slipping for the first time since 1998. This is down to greater competition among insurers.

Between July and September the average price - covering family saloon, economy hatchback and sports cars - fell by more than £6 to £710 per policy. "Tesco, Sainsbury's and M&S all want to write business and offer good rates [to customers]," says Kate Armstrong, managing director of Confused.com. "Other insurers are lowering their rates, and we are starting to see the effect."

M&S Money, the chain's financial services arm, which entered the car insurance market just six months ago, plans a big sales push next year. So motorists can expect even more competitive rates.

Sainsbury's went into car cover through its banking arm in July last year, while Tesco Personal Finance, a joint venture with Royal Bank of Scotland, first offered policies in October 2000.

Given the evidence that premiums are falling, motorists should review their own policies to see if they can get a better deal. With some 80 insurers selling car policies, there is plenty of choice.

"Providers have relied on [customer] inertia across all financial services," says Stuart Glendinning, marketing director for Moneysupermarket.com, a website that compares financial products. "But my feeling is that motor insurance is one [service] where people are more likely to shop around because of the significant savings to be made, and the renewal reminder sent out each year."

Esure, which underwrites policies for Sainsbury's Bank, says it cut one former Norwich Union customer's annual fully comprehensive policy from £1,452.87 (with basic roadside assistance) to £325.93, including full breakdown cover.

If you are buying a new car, there are similar savings to be made. A 25-year-old from Birmingham who wants to insure her brand-new five-door Peugeot 307 two litre - and is prepared to pay £100 excess on any incident - could save as much as £823, says Moneysupermarket. She could pay £2,123.10 with Nationwide but the cheapest policy is from the RAC, at a cost of £1,299.80.

Once you've found a policy, check the premium you pay every year in case your insurer starts raising its prices. "This is why it's so confusing," says Ms Armstrong at Confused.com. "It can be inexplicable if, after one year, the price goes up even if you have been a perfect driver. Amazingly, nearly half of people just don't shop around." In fact, most drivers don't tend to change insurers until they've had a bad experience such as a badly handled claim.

Although it's tempting to be guided solely by price, you also need to ensure you have adequate cover for your own motoring needs. For example, if you use your car on business, your policy will be cutting corners if the premiums are geared to local use such as school runs and shopping.

"Don't sacrifice cover to get prices down," says David Pickett, car insurance manager for Sainsbury's Bank. "People should always look for like-for-like policies. A lot of companies may take out elements [that you had before] to bring down price, so it's vital to check."

Insurers may offer a better deal by increasing your excess or removing policy clauses - for example, the provision of a replacement car after an accident. It's important, therefore, to clarify any changes suggested by the salesperson. Mr Pickett recommends making a checklist when buying car cover over the phone.

Watch out when using the internet, too: many insurers only offer standard-risk premium quotes online. Website www. insuresupermarket.com is another good place to visit as it includes quotes from a range of insurers.

Before you start comparing policies and prices, decide what kind of cover you want and how much excess you are prepared to pay if you have to make a claim. Most drivers choose fully comprehensive insurance, which pays out for damage to a third party, your car and to property. Extra features such as a courtesy car and breakdown support can be bolted on if you are prepared to pay more.

As with all financial services products, take a close look at the small print. Ensure you are fully covered for your requirements, and see if you can save money by checking what you really need and what can be jettisoned from a policy.

It may also be worth protecting your no-claims bonus - a move that in effect enables you to insure your own insurance. Years of careful driving can drive down the cost of cover by as much as 75 per cent in some cases - a saving worth paying to keep. Protecting your no-claims discount will usually cost a further 10 to 20 per cent of the premium.