Tighter personal finances are causing many holders of insurance policies to downgrade their level of risk in a bid to save money.
This sign of the times has become particularly evident in the motor insurance industry with companies reporting that one in four drivers in Ireland have either considered or made the switch from fully comprehensive to third party or third party fire and theft motor insurance within the last two years.
According to the study by AA Motor Insurance, people are moving to cut insurance costs due to tighter personal finances. However, just five per cent of drivers overall have actually gone through with downgrading their cover. Of the remainder, many indicated the price gap between the two levels of cover was much narrower than anticipated and not worth the loss of peace of mind. Others reported the “fear factor” encouraged them to look for savings elsewhere in the end, after worrying they would fall foul of Murphy’s law if they made the switch.
“If you’re on the fence when it comes to comprehensive versus third party insurance there are two obvious questions you should ask yourself,” said John Farrell, director of AA Insurance.
“Firstly, how well you would cope with a big repair bill in the event of an accident, malicious damage, or weather damage, and secondly, how dependent you are on your car. Our advice is to reduce your premiums by shopping around rather than downgrade. You could well make the savings you’re looking for without jeopardising your level of cover. ”
The greatest inertia as regards switching from one level of car insurance cover to another is among the over 65s, according to the AA Motor Insurance study. In contrast, the youngest cohort of drivers on our roads, 17-24 year olds, were identified as the most likely switchers with 12 per cent of those polled indicating they have reduced their cover within the last two years.
“This group is paying the highest premiums and is often driving lower value cars so it’s not all that surprising to see more movement,” said Mr Farrell.
“However our advice to this age group is the exact same. Come renewal time, shop around before you make up your mind. If you’re struggling with your premiums chances are you’ll be hard pressed trying to cobble together the money if your car needs a major repair.”
