Revealed: Why you might now face an enormous 42% penalty when renewing your automobile insurance coverage

Motorists who buy their car insurance too close to their renewal date can now end up paying a whopping 42 per cent penalty, Money Mail can reveal.

Experts say the huge spike in the cost is being driven by a pernicious trend among criminals who make fraudulent claims within 48 hours of taking out a policy.

But as insurers try to crack down on this, they are inadvertently penalising honest drivers who leave it late to shop around on comparison sites.

On average, customers who buy insurance on the day their old policy renews are paying £164 more than those who get it sorted earlier – with the sweet spot for the best deals far earlier than most drivers realise.

According to GoCompare data, that now means buying car insurance 26 days in advance. 

Here we show exactly why.

Prices vary wildly – but predictably

Our day-by-day analysis reveals how the date you shop around for your new car insurance policy has a huge impact on the price.

You can renew your car insurance up to a month before it expires.

Using the median average – the middle number – for premiums paid by customers aged over 18 for fully comprehensive cover, GoCompare found you pay £554 when buying on the same day you want the policy to start.

This compares with just £390 if you bought the exact same cover 26 days beforehand.

But the statistics reveal that you should also not take out insurance a full month before your old policy expires.

If you bought at the earliest possible moment – typically 30 days before renewal – you pay £440 on average.

This is £50 extra compared to taking out the policy 26 days before the renewal date.

Experts say this is because there are fewer deals available. Many insurers do not want to reveal their best deals a full month in advance, fearing competitors could take advantage of this information and try to undercut them.

What many people don’t realise is that after about 21 days before the renewal date, the price steadily climbs.

It then leaps eight days before renewal, accelerates again five days out – and finally spikes on the renewal day itself.

The sweet spot is between 21 and 26 days before renewal – but anything before more than 15 days to renewal should still secure you a competitive price, the data shows.

Being organised really pays off 

According to the experts, the prices partly reflect the type of person we are. Insurers consider those who plan ahead to be more responsible drivers than those who are renewing at the last minute.

Alicia Hempsted, car insurance expert at MoneySuperMarket, says: ‘Insurers tend to regard those who organise their cover early as more responsible and therefore lower risk, translating into more favourable rates. 

This does not mean you are a better driver because you plan ahead, but statistically there is a correlation that such motorists are less likely to have an accident than those who rush to get things done at the last minute.’

However, there is something more sinister at play here, too.

Drivers pay a massive 42 per cent more if they take cover out at the worst moment – the day of their policy renewal – compared with the best day, which is 26 days beforehand. Experts believe fraudsters are largely to blame for this huge gulf.

Ian Hughes, chief executive of insurance analyst Consumer Intelligence, says it is down to the way criminals operate. 

Those driving around without cover take out insurance for damage that has already been done to their vehicle – and then make a claim within 48 hours of taking out that cover.

He explains: ‘Motorists who take out cover at the last minute are swimming in the same pond as fraudsters. Insurers are getting wise to the trick that many fraudsters claim within 48 hours after taking out cover.

‘This is why premiums are hiked. It means fraudsters and honest motorists get put together in paying higher premiums.’

There are an estimated one million uninsured motorists on the road, according to not-for-profit body Motor Insurers’ Bureau (MIB), and in the past four years 352,000 motorists have been convicted of driving without insurance, says comparison website iCompario.

Motor insurance broker Gary Hamilton, of Keith Michaels Insurance, believes some of the fraudsters may be taking out policies on the day because they have had vehicles seized and impounded by the police or local authorities, for reasons such as failing to pay parking fines or driving without insurance, and need proof of cover to get them out.

The police seized more than 214,000 vehicles in 2023, according to latest figures from motoring group the RAC.

Hamilton says: ‘Many cars are in the pound because they have no cover. There may be a fine to pay of more than £100 to get your vehicle back, but there could also be a daily storage charge of more than £20 for when the car is impounded.

‘These drivers are taking out an insurance policy so they can drive the car out of the pound.’

Websites lump all drivers together

Around 60 per cent of motor insurance policies are bought through price comparison websites, so the figures shown on

the graph reflect the prices on different days for the majority of policies. But the comparison sites use algorithms which are unable to differentiate between fraudsters who are planning to claim for a damaged vehicle and legal motorists.

Hamilton says: ‘These websites use computer software that contain algorithms that throw all motorists together when working out the price of a policy. 

‘For someone who has been illegally driving a car, it can make sense to take out insurance so the insurer foots the garage bills if it is cheaper than paying for the repair themselves. 

‘These criminals do not care that their selfish actions are causing premiums to rise for honest motorists.’

The fraudsters who take out motor insurance claims do so when the damage does not involve another vehicle. 

If another car is involved, the date and time is logged. This means it should not be possible to put in a claim, as the incident took place before the policy was taken out.

More than 26,000 motor accidents a year involve cars without cover – which includes the fraudsters, according to the MIB.

If involved in an accident with a driver who does not have cover, your insurer should still pay for repairs if you have fully comprehensive cover but you could still lose your no claims bonus, so annual premiums will rise.