By Iwan Doherty

The last year has seen a rise in car insurers offering a new tier of “essentials” or “value” policies. Admiral, Ageas, and Hastings have had these policies for some time, but 2023 saw a host of new providers enter the market with Churchill, Sainsbury’s, Geoffrey Insurance adding an "essentials" policy to their product list, as well as new insurers like Boom and Moja introducing them as an option. Of the largest 10 car insurers 60% have essentials policies, only Aviva, Saga, LV= and AXA have no essentials style product. 

Essentials policies cover accidental damage, so provide more cover than third-party, fire, and theft policies (a more basic tier of car insurance), but they cut out features that are included in the average car insurance policy. For example, essentials policies usually have no cover for windscreens, so customers would have to fix chips and cracks using money from their own pockets. Additionally, they generally have no cover for stolen keys, and no uninsured driver promise (a guarantee that your no-claims discount will be reinstated and your excess will be reimbursed if you're involved in an accident with an uninsured driver).

The benefit of essentials policies is the price. They offer a cheaper option for those who are willing to take the risk of having less cover, or those who can’t afford more expensive cover but still want comprehensive insurance. Essentials cover can be significantly cheaper. 

Displaying different cover levels

Since many customers will choose essentials cover because of the price, it is vital that the insurers selling these products are honest with customers about what features aren’t included. To be fair to car insurers, even the policies with the fewest features, such as Boom Essentials (shown below), are open with customers about the bare-bones nature of the product.

What is vital is that car insurers list what isn’t included in the policy, which is central for making consumers understand that they will be without covers and features they might assume are included in their insurance. 

Some good examples of how to present tiered policies are below, from Churchill and Admiral. In both examples, the cover levels are clearly displayed and, crucially, where policies are missing key features, such as keys and locks cover or the uninsured driver promise, it is clearly stated. 

However, not all brands are doing such an exemplary job. Some providers are committing the sin of omission when detailing the features of their essentials policies. Policies that don’t include features like a courtesy car while yours is being repaired, an uninsured driver promise, or windscreen cover should clearly state these exclusions in the journey. 

Neither these essentials policies, Co-op Essentials, and 1st Central Value, include an uninsured driver promise, yet in neither case is this made clear in the online purchase journey. 

Generally, though, providers are doing a good job in showing customers what their essentials policies are missing. This could perhaps be because they want customers to upgrade to a more expensive cover level. 

Comparison Sites

Comparison sites could perhaps do better when it comes to showing the reduced cover offered by essentials policies. The screenshot below shows how the Ageas essentials policy and the Ageas standard policies are displayed on MoneySuperMarket. The only difference visible from the ticks and crosses is that the essential policies doesn’t cover windscreen damage, despite the essentials cover missing numerous core features like cover for keys and locks and an uninsured driver promise.

Theoretically, defaqto’s star ratings should help inform consumers that the essentials policy is less comprehensive, but they may not see a three-star-rated policy as particularly stripped-back. 

Minimum cover

This raises the question of whether there should be a minimum standard that comprehensive policies need to meet to prevent insurers from continually stripping features from their policies to bring down the price and aid their profitability. 

Swinton’s essentials policy has a £150 limit on its windscreen repair and replacement services. Given the rising cost of glass, this makes it very likely a customer would pay the excess and an out-of-pocket expense if their windscreen needed replacing. By having this cover but offering low cover limits, insurers can pay out less per claim while still maintaining that their cover is “comprehensive”.

These subtle changes in limits add to the complexity of car insurance - a product that has already become more complicated because of the introduction of different tiers of cover (‘brand stacking’). Many brands once had a single comprehensive car insurance policy, but now they often have three or four tiers of policy, ranging from essentials to “Premier” or “Plus”. This is challenging for consumers because it isn’t always straightforward to compare products, even across the same tier. AXA’s basic policy, for example, does not offer a courtesy car if yours is being repaired (a cover provided by most essentials products). This adds to the probability of a consumer misbuying a product as they don’t fully understand what cover it provides. 

Essentials policies, then, might lead to greater consumer misunderstanding. Customers should have the choice to customise their cover, but the right guidance is vital to ensure they understand their insurance needs. If comprehensive cover had to meet a minimum set of requirements, consumers could be more confident that the cover they were buying was of the required quality.

Brands are being transparent about their lack of cover and maybe many customers are welcoming cheaper insurance in these hard times. But more is needed to make sure customers are clear about what their insurance does and does not cover.