22/04/2016 06:50 BST | Updated 19/04/2017 06:12 BST

Taking Action Before the Fuse Burns Out - Saving Money On Insurance Premiums Means Identifying and Seizing Good Opportunities To Act

Unbeknown to me (and seemingly many other people) the cost of renewing financial services such as insurance depends on when you renew. Apparently, drivers pay an average of £600 for their insurance if they renew the day before their renewal date, but just £366 if they switch their provider three weeks prior to their renewal date. In contrast, home insurance policies tend to increase in cost until one week before renewal and then fall slightly before the final renewal date (although the cheapest time to renew is still 28 days beforehand). So, if you want to save money, then it pays to find out when premiums are likely to be cheapest and make sure that you renew at the right time.

But renewing at the right time is easier said than done. According to a poll conducted by YouGov, 15% of us leave renewing our car insurance until the day before the renewal is due, resulting in us paying more than we need to. For many, this is likely to be because they are blissfully unaware that they could save money by switching providers earlier, but for others good intentions (e.g., to renew as soon as they receive the renewal letter) may have been thwarted by 'psychological inertia' - a tendency to put things off and maintain the status quo. The Institute of Inertia, a partnership between and the University of Sheffield, has been investigating this problem and our research suggests that - although many of us have good intentions - pressures on time and resources mean that we often fail to take actions that could save us money in the long run.

The difficulty of acting on good intentions is likely compounded when there is only a limited window of opportunity in which to take action. Psychologists Uptal Dholakia and Richard Bagozzi call actions that must be enacted within a limited window of opportunity "short fuse behaviours". In their seminal article they give the examples of airplanes or trains that must be caught before they depart, library books and rental movies that must be returned by their due date, and meals at fine restaurants or stays in popular hotels that can only be enjoyed if reservations are made in advance and honored in a timely fashion. However, now it seems that we need to add renewing our insurance policies to this list.

But rather than get depressed about this state of affairs, lets consider what strategies we can use to help us to identify and seize a good opportunity to act. Dholakia and Bagozzi suggest that planning in advance can help people to seize these opportunities. In an illustrative study, they told undergraduate students that, if they wanted to be eligible to win a prize, then they would need to visit a website that would only be available for a limited period of time - in other words, visiting the website was a short fuse behaviour that required the students to seize the opportunity. One half of the sample were then asked to make a detailed plan specifying when, where, and how they would visit the website (the other half of the sample answered unrelated questions). When Dholakia and Bagozzi compared the number of students who visited the website, they found that those who formed a plan were more than twice as likely to visit the website (70%) than students who did not make a plan (33%).

Taken together then, it seems that if we want to save money on our insurance premiums then we need to take action before we end up paying more than we need to. So why not seize this opportunity, look up your renewal date, and make a plan to compare providers and select a policy in good time, before the fuse burns out?


Dholakia, U. M., & Bagozzi, R. P. (2003). As time goes by: How goal and implementation intentions influence enactment of short-fuse behaviors. Journal of Applied Social Psychology, 33, 889-922.