Dear Rocio,

Haggling on car insurance can lead to hefty reductions. But how fair is it?
Name and address received.

Rocio says: Renewing a car insurance policy for another year can be a double-edged sword. At first glance, it’s a painful reminder of a hefty outgoing from your bank account. But after further reflection, it can be a chance to negotiate with your insurer for some money off.

Firms seldom like losing customers to rival companies, so many of them are open to people trying their luck and haggling. So, the insurer is happy because it keeps a customer. And the customer is happy because they negotiate a discount on their premium.

Everyone’s a winner, then. Or are they?

A new Which? survey of over 2,000 car insurance customers has looked under the bonnet at haggling and found some concerns.

The majority (59%) told us they haggled with their insurer (mostly over the phone), with three fifths of those doing so reporting a reduction to the original quote offered. On the face of it, that’s good news. But when you consider that insurers (and indeed all firms working in the financial services sector) are bound by regulatory requirements to offer customers fair value, the picture becomes less clear cut.

In July 2023, the Financial Conduct Authority introduced a Consumer Duty for all firms to follow – a key requirement of which is to ensure customers receive fair value for the products and services they buy. If this is the case, then how can the initial quote, beaten down after relatively little work such as a short phone call, represent fair value?

Our survey found that the most common discounts (a fifth of respondents said this for each) were more than £20 or up to £40, or more than £40 and up to £60 off their original annual quote. These are reductions not to be sniffed at – especially at a time when many consumers continue to battle the high cost of living.

But some customers were offered far more money off the original quote than that. Five per cent of respondents were able to save more than £200. That figure raises serious questions about whether the original quote was really a fair price – and therefore whether firms are meeting their regulatory obligations.

Then there is the issue of not all customers being aware of haggling. The survey found that 40 per cent of respondents did not discuss the price offered before renewing, suggesting that many customers may be unfairly paying over the odds. For some people, haggling is not something they’re willing or able to do, so it’s particularly concerning that some vulnerable groups, including disabled people, are missing out on the opportunity of the most competitive price.

The opaque nature of pricing in insurance makes the process of haggling more suspect. The FCA has said that where upfront discounts are clear and firms can demonstrate that customers not receiving discounts are getting fair value, this could meet regulatory standards.

With some motorists receiving such hefty discounts after haggling, Which? believes there are serious questions about whether the first offer from the insurer in these cases really represents fair value, as per the Consumer Duty requirements.

The FCA for its part is currently reviewing motor insurance business models and Which? thinks it should be investigating haggling and the fairness of it as part of this work, as well as other pricing practices, and which groups of consumers are more likely to lose out from them.

Rocio Concha is Which? director of policy and advocacy at which.co.uk. To have your question featured on this page, email business@theipaper.com