By Steve N Jones

As the effects of the UK recession continues in 2011 families need to look at ways to save as much money as possible. Now there are hundreds of ways you can do this, such as, dropping down a brand in your food shopping, run your water less, turn your heating down etc etc. However these costs are part of the basic human need of food and shelter. Looking further and looking at your finances like a business the way to save the most money is reduce your fixed costs as much as possible. Your fixed costs include things like rent, mortgage, and anything you pay a flat amount every month. One of the key ways to reduce one of your biggest costs is to look at your Car Insurance premium.

The insurance information institute lists loads of ways to reduce your Car Insurance premium but how much do they actually change your premium? Premium costing is quite an exact science in the way that Car Insurance companies calculate them. The basic formula is the cost of the premium (to the provider) this includes things like cost of capital, risk, cost of claims, admin costs. Then you add on the profit margin and any tax or interest you pay for paying your Car Insurance premium monthly. You also take into account appetite to do business and the current market competition but this is more an economics lesson than a savings one!

We looked at the effects of changing the variables on your policy we found that moving the numbers and the type of alarm your vehicle has doesn’t actually move the premium that much. Moving the excess made a small change and obviously moving from full comprehensive Car Insurance to third party clearly makes a huge difference. The main thing we saw as the way to save as much money as you possibly can is by changing your Car Insurance provider, this is normally an annual event.

There are many reasons for doing this, back to the economics a provider will change its appetite for different types of business on a regular basis. The will decide that they have to much exposure to certain groups and increase their prices accordingly or they might see a rise in risk in one particular group. This also works in the opposite direction, if a Car Insurance company sees a fall in claims for 25-30 year old women they are very likely to drop their premium to attract more of this business to them.

When we ran a comparison you can clearly see these market forces working, if you get 50 quotes they will range from extremely high (in some cases in to £1000-£2000) and the same quote produces prices as low as £100. The only way to find this out is by doing the work of doing a comparison. Keeping yourself up to date with this information when your premium is due for renewal is key to saving as much money as possible.

Our top tip is to start looking at prices as early as possible, when you see a price for your Car Insurance that you are very happy with you get it and stick with it.

Then the following year when your premium is due for renewal you do the process again. The key is not to get lazy and accept your renewal quote for the sake of 30 minutes on your computer.

The Compare Shop writes articles about topics relating to Car Insurance. We review industry trends and hot topics.

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