Insurance renewals and automatic renewal

Most car, home and other general insurance policies do not simply end on their expiry date. If automatic renewal is switched on, the policy rolls into a new year and the premium is taken from the card details the insurer holds, unless you act first. Financial Conduct Authority (FCA) rules require firms to tell you in good time before renewal what the new premium is, what you paid last year, whether the contract will renew automatically, and that you can compare prices from other providers¹. Automatic renewal exists so that people are not left uninsured by accident, but it also means money can leave your account for a policy you no longer want.

The rules on renewals apply to general insurance contracts that last 10 months or more and are not group policies¹. So the picture below covers the great majority of car, home, travel and pet policies. Long-term policies such as life insurance and pre-funded care plans work differently and are covered later on this page.

The Financial Ombudsman Service has seen what happens when renewals run on untouched. In one case it published, a homeowner's policy "renewed each year automatically with no contact or engagement" from him². In another, a customer renewed her home insurance each year without question for six years before noticing the premium had risen considerably and shopping around³. Automatic renewal is convenient, but it works well only when someone reads the renewal notice.

Automatic renewal: your policy rolls over unless you act

Automatic renewal means the insurer starts a new policy year on the expiry date of the old one and takes the premium from the payment method on file, without any action from the customer. Under FCA rules, a firm must inform a customer whether the policy automatically renews at the end of the term, explain the effect of automatic renewal, and give information on the right to cancel the automatic renewal element at any time¹. The renewal notice itself must set out the premium to be paid, the last year's premium for comparison, a statement that the level of cover is appropriate and that prices from alternative providers may be compared, and whether the contract will automatically renew¹.

The point of the rule is that automatic renewal should never be a surprise. The ombudsman's case files show how easily it can become one. In the case of the homeowner described above, the policy renewed each year with no engagement from him at all, and the complaint that followed was about a price increase at renewal and misleading information². In the second case, the customer had never made a claim but only realised after six years how much the premium had grown, and the ombudsman looked at whether the information provided at renewal was misleading³.

Automatic renewal is not unique to insurance, and the problems it creates are not either. The ombudsman lists automatic renewal among the common complaints about mobile phone and gadget insurance, alongside mis-selling, misleading wording and refused claims⁶. Outside insurance, the Competition and Markets Authority has investigated subscription plans where "customers were automatically rolled on to a plan with the additional features at a higher price, unless they took steps to either pick another plan or end their subscription"⁷. The pattern is the same: the default is to keep taking money, and the consumer has to act to stop it.

There are also rules about what can change under an automatic renewal. FCA rules on renewals of agreements state that an automatic renewal is not to be regarded as being on substantially the same terms if, following the renewal, a charge will or may become payable for an optional additional product for the first time⁸. In other words, a renewal that quietly introduces a new charge for an add-on is not just a routine rollover. Changes in the level of charges for an optional additional product are otherwise disregarded when deciding whether a renewal is on substantially the same terms⁸, which is why reading the renewal notice, not just the price, matters.

Continuous payment authority: how the card on file keeps cover running

The mechanism that lets an insurer take next year's premium without asking again is usually a continuous payment authority (CPA). This is a permission you give a business to take payments from your credit or debit card when they fall due, and it is the same method used for magazine subscriptions, gym memberships, some debt collection agencies and payday loans⁹. Unlike a direct debit, a CPA is tied to your card rather than your bank account, and the business, not you, triggers each payment.

Because the authority sits on the card, anything that changes the card can affect it. If your bank cancels your card and sends a new one, for example to stop fraudulent transactions, the bank "may cancel your current card and send you a new one to stop any other fraudulent transactions from your account"¹⁰. Many banks also operate automatic card updater services, which pass your new card details to businesses you have paid before. Reporting by Which? has found that "most customers actually can't opt out" of these updater services, because the bank does not give them that control¹¹, and its investigation into the "cancelled card loophole" found that recurring payments can follow you to a new card, with Barclays among the banks not allowing customers to opt out¹². The practical consequence is that cancelling or replacing a card is not a reliable way to stop a renewal payment.

There are limits on how a firm can use a CPA. Where a customer is in financial difficulties, FCA rules state that "a firm must not request payment on a continuous payment authority more than twice on the same agreement once it has already been refused"¹³. Official guidance for consumers puts the same limit plainly: "a CPA must not be used more than twice to recover money from your bank account"¹⁴. A firm also must not amend the terms of a continuous payment authority without first obtaining the customer's consent, after having fully explained the reason for the amendment¹³. So an insurer cannot quietly change what it takes from your card.

For insurance specifically, the CPA is what makes automatic renewal seamless: the new policy year starts and the money goes out on the renewal date. That is convenient when you want the cover, and it is why the FCA requires firms to explain the effect of automatic renewal before it happens¹. When you do not want the cover, the CPA is the thing to deal with, and the later section on cancelling a card payment explains how.

Checking your renewal notice before the date

The renewal notice, sometimes called the renewal invite, is the document that sets out what the next year will cost and on what terms. FCA rules require it to reach the customer in good time before the renewal, and it must show the premium to be paid on renewal, the last year's premium for comparison, a statement that the cover is appropriate and that prices elsewhere may be compared, and whether the contract will renew automatically¹. From the fourth or subsequent renewal onwards, the firm must also include this statement, worded exactly as the rules require:

Checking the notice is worth doing for three reasons. First, the price: the notice shows the new premium beside last year's, so the increase or saving is visible at a glance. Second, the cover: the rules require a reminder to check that the level of cover is still appropriate¹, because a policy that suited you a year ago may not now, for example if you have bought valuables or changed cars. Third, your details: the answers you give at renewal must be accurate, and the ombudsman is clear that "if something changes after the policy has started, the customer won't usually have to tell the insurer about it until they renew the policy"¹⁵, which makes renewal the moment to put changes right. Giving wrong information at renewal can let the insurer avoid the renewed policy, as the guide to misrepresentation explains.

Timing your check matters too. Debt charity StepChange advises: "Make a note of when your policy is due for renewal and set yourself a reminder a few weeks before it ends"¹⁶. Comparison site MoneySuperMarket's data, reported by Which?, suggests "the best time to get a good deal on your car insurance renewal is 15 to 29 days" before the policy end date, and that "renewing on the last day could see you paying 17% more"⁵. Carers UK similarly reports that renewing car insurance "at least 20 days before the renewal period is due to end" could put you in line for discounts and a better rate¹⁷. The figures come from different sources and are not identical, but they point the same way: quotes gathered well before the end date tend to be cheaper than those left to the last moment.

It is also worth checking that the policy is still current and paid up to date before renewal, as the British Insurance Brokers' Association advises in its home insurance guidance¹⁸, particularly if you pay monthly and a payment has ever failed. A lapsed policy will not renew into anything useful.

Opting out of automatic renewal

You are not obliged to keep automatic renewal on. FCA rules require firms to give you information on your right to cancel the automatic renewal element at any time¹, and in practice opting out means telling the insurer, through whatever channel it provides, that you do not want the policy to roll over. Santander, for example, tells its home and car insurance customers they can opt in or out of automatic renewal, with the choice for car insurance made through its self service centre and the home insurance opt-out available at any time via its contact form¹⁹.

The trade-off is important and insurers state it plainly. Santander warns that opting out of automatic renewal may leave you uninsured if you do not take action at renewal¹⁹. Once auto renewal is off, nothing happens on the expiry date: no new policy year starts and no premium is taken. For car insurance that means it becomes illegal to drive the car uninsured, and for home insurance it means the property is unprotected. Anyone switching auto renewal off needs a plan: either a new policy arranged to start when the old one ends, or a deliberate decision to be uninsured for a period.

There are also rules that can stop renewals even when a firm would rather continue them. FCA rules on products say that where an existing product does not meet the needs of its target market, a firm must "cease any renewals for existing retail customers, provided that existing retail customers are easily able to move to an alternative product that provides at least the same level of benefit at an equivalent cost to the customer"²⁰. This is a rule about firms acting fairly across their book of business rather than a right you exercise, but it explains why a policy sometimes fails to renew: the insurer may have withdrawn it.

Opting out of automatic renewal is different from cancelling the policy. Cancelling ends the current policy year, with the rules on cooling-off periods, refunds and fees applying. Opting out only stops the rollover, and your cover continues to the end of the term you have paid for.

Cancelling a continuous card payment to stop renewal

If the renewal date is close and you do not want the premium taken, the payment itself can be stopped. The FCA explains that you can cancel a recurring card payment by contacting the business taking the payment and asking them to stop, or by asking your card issuer to cancel it⁴. The Financial Ombudsman Service says the same: "To cancel a recurring payment, you need to contact either the business or your card provider"²¹. Asking the insurer is usually the cleaner route, because it also puts on record that you do not want the renewal. But if the insurer is unresponsive, the card route works on its own.

The card issuer's obligation is strong. The FCA states that "once you've asked them to, your card issuer must stop the payments, even if you haven't contacted the business"⁴. If you did not consent to the recurring card payments in the first place, your card issuer should stop the payments and give your money back⁴. Under the Payment Services Regulations 2017, summarised in trading standards guidance, "your bank or card provider must cancel the payment authority"²². Debt charities describe the same right: once you have cancelled directly with your card issuer, "it must stop payments immediately"²³.

There is a deadline to be aware of. The FCA advises that you must ask your card issuer or the business to cancel the payment "by the end of the business day before your next payment is due to be taken"⁴. In practice, asking earlier is safer. Some guidance suggests putting the request in writing: Business Debtline advises that "you will need to write to your card issuer asking for this payment to be stopped" and provides a sample letter²⁴.

Two limits on these rules are worth knowing. Citizens Advice points out that the rules about cancelling future card payments "do not apply to card purchases for goods or services, such as in a shop or paying a hotel bill"²⁵, so they cover recurring payments, not one-off card spending. And the rules sit alongside the card updater services described earlier: because banks can pass new card details to businesses automatically¹¹, a cancelled card is not a substitute for a properly cancelled payment authority.

When a policy will not renew automatically

Not every insurance policy renews on a yearly treadmill. Long-term care plans are the clearest example: the ombudsman notes that "as the policies are long-term plans, they don't need to be annually renewed in the way motor or household policies are"²⁶. Life insurance works the same way, running continuously as long as the premiums are paid. The consequence of that continuity is that missing payments is more serious: with life insurance, "if the policy lapses due to non-payment of premiums, coverage stops, and no benefits will be paid upon the policyholder's death"²⁷. There is no renewal notice coming to rescue a lapsed life policy.

Some policies end for reasons outside the renewal cycle altogether. Shelter Scotland's guidance on "no DSS" benefit discrimination describes insurance terms of this kind: where such terms are in a current insurance policy they may still be enforceable, "however, they are only valid until the current insurance policy ends or it reaches its renewal date. After that, they will not be enforceable"²⁸. A policy can also fail to renew because the insurer has withdrawn it under the product rules described earlier²⁰, or because it was never eligible for the renewal disclosures in the first place: the FCA's renewal rules apply only to general insurance contracts of 10 months or more that are not group policies¹.

For short-term policies, the practical rule is simple: assume nothing. Check the renewal notice for the automatic renewal status¹, and if none arrives, contact the insurer before the expiry date rather than after it.

Shopping around or switching insurer at renewal

Renewal is the natural moment to compare the market, and the rules are designed to push you towards it. Since January 2022, FCA pricing rules for car and home insurance mean that "insurers will have to offer existing customers wanting to renew, a price that is no higher than they would pay as a new customer" through the same sales channel²⁹. This ended the loyalty penalty, where long-standing customers paid more than new ones. The guide to insurance pricing rules covers how this works in detail. Even so, the renewal price is only one insurer's price, and different insurers will quote differently for the same risk, so comparing quotes remains worthwhile. StepChange's guidance is blunt about the alternative: letting a policy auto renew "ties you in for another year, often at a higher price"¹⁶.

The ombudsman's case studies show the value of checking. In the case described earlier, the customer renewed without question for six years before shopping around, and the ombudsman examined whether the information at renewal had been misleading³. In the other, the policy renewed automatically with no engagement from the customer at all². The required renewal disclosures, including the shop-around statement from the fourth renewal onwards¹, exist precisely to break that pattern.

Switching has a few practical consequences worth knowing:

• No claims discount. A named driver's claim-free years may be rewarded, but only if they renew with the same insurer, as some insurers reward named drivers who do not claim only on that condition³⁰. Switching insurer as a named driver may mean that reward is lost.
• Claims in progress. The ombudsman confirms that "a policyholder can cancel their policy and set up a new one with a different insurer whenever they want, even if a claim is ongoing", but the claim will affect their no claims bonus³¹.
• Health changes on travel cover. Where a significant change in health means new cover is bought elsewhere, the ombudsman may consider it fair for the current insurer to pay the difference in premium charged by the new insurer, up to the value of what a cancellation claim would have been at the time of the change³². The guide to travel insurance and changes in health covers this.

When comparing, remember that the cheapest quote is not always the same cover: check the excess, the cover limits and the exclusions, as the guides to insurance excess and how insurance works explain. If a renewal has gone wrong, for example a payment taken after you cancelled, complain to the insurer first and then to the Financial Ombudsman Service, which can look at complaints about renewals and regular payments²¹. Free, impartial help is available from MoneyHelper and from debt charities such as StepChange if the issue is affordability rather than the renewal itself.