(This is an extract from my forthcoming book on Credit Cards)
- Many insurance companies will now auto-renew your annual car / house-related premiums. This is not necessarily a bad thing, but also not necessarily a good thing.
Unexpected or Inconvenient Time
Unless you keep close track of this it may cause you an “unexpected” problem or at minimum a surprise at an often inconvenient time.
My recent experience is that:
(a) it is difficult to get real bricks and mortar car/house-related insurance offices to visit in Australia
(b) the auto-renewal stunt is pulled after they have recorded your credit card number during the sales conversation, and normally also in a much more matter-of-fact oh-by-the-way remark-like way.
“The Way We Do Business”
I had that experience recently and even though I asked for the auto-renewal to be removed, I was told that it is the way the company does business.
Check in your country if there is an authority that can give you more advice on this. In Australia the Australian Securities and Investments Commission has taken up this matter and six of the insurers informed that it is part of their business model. Of course you do not have to abide by this and can call them before the policy renewal date or even afterwards to cancel and get a pro-rata return.
- One way to stop auto-payments is to not give your credit card number and insist that you will pay the premium at the Post Office or through an internet transfer (such as BPAY).
- Another option is to buy a pre-filled temporary credit card which you can dispose of afterwards. These cards are normally also available at Post Offices. And the insurer (or whomever they are) cannot get their hands on your real credit card number. The ball is, however, now in your court to remember your premium payment’s date to ensure you do not become uninsured.
Reversal of Premium
You should be able to get a cancelled premium reversed though and that is often another bone of contention: trying to get them to reverse the debit in time for you to use your card to pay for a better deal.
I just went through that process and though the money is normally taken off your card immediately, it takes 5 – 7 business days for the card company to reverse the money back into your credit card account.
Cancel Your Card
- There is another way to stop insurance companies and it is to cancel your credit card and get your bank to issue a new card. This is however a real hassle and it may cause issues with other transactions such as pre-paid flight tickets where you often have to present the card you bought the tickets with months earlier. But it is one way to protect yourself from such companies.
I also think you should be able to cancel and if the insurer auto-renews without permission then you should be able to take them to court for at least theft, but the law is an ass at the moment.
Shop Around at Renewal Time
The benefit and argument that the insurance companies use is that it keeps you insured. However, the decision should still be yours because near the end of the period you may want to (in fact perhaps SHOULD) shop around for a better premium.
- It is known that insurance companies increase your 2nd year policy sometimes out of proportion since they know that they have already taken the money off your card.
- And it is also known that insurers entice new customers with cheaper initial rates. Loyal customers pay the price to lure new clients instead of being rewarded for their loyalty.