Car hire insurance rip-off: policies five times more expensive with rental companies

Major car hire companies are charging customers five times the price for insurance that is less comprehensive than policies available from third parties online.

New research from Which? Travel found car hire companies, such as Avis, Europcar and Enterprise, charging an average of £110 for a week's insurance in Spain. But the average price from the best online excess insurance companies for the same period was just £21.

Not only were third-party providers much cheaper, but the cover offered was far better. Which? insurance experts gave the top eight online insurance providers a policy score ranging from 70% to 87%. In contrast, the highest rated car hire provider policy score was 61%; the lowest just 42%.

Don't pay over the odds. See our full table of the best rated car hire insurance policies

How car hire insurance works

As car hire companies compete for business on comparison sites, so the price for rental has dropped to as low as £1 a day. But car hire companies still have to make their money somewhere. That 'somewhere' is insurance.

In Europe, car hire comes with just basic insurance included in the price. You won't have to pay the full cost of replacing a stolen or damaged vehicle, but this basic insurance is subject to an excess of up to £2,000.

To reduce this liability, most people take out an excess insurance policy. You can either buy this from the car hire company, or from an independent insurance firm online. If you buy it online it is called Excess Reimbursement Insurance (ERI).

The only downside of taking out an independent ERI policy is that any charges will still be deducted from your credit card by the hire company. You will have to claim them back on your insurance.

The car hire insurance rip-off

An ERI policy online is always far cheaper than buying insurance from the car rental company. And ERI offers even better value if you buy an annual policy.

For example, we found you could get nearly four year's worth of ERI cover with a company like InsureFor, Questor or Insurance4CarHire for the same price as a week with Europcar.

And the cover would be more comprehensive. All of the best ERI providers Which? looked at covered you for damage to the windscreen, tyres and underbody of the car. They also cover you if you are locked out, put the wrong fuel in your car, or are forced to cut short your car hire.

None of the car hire companies' policies that we looked at covered all this.

Which? Travel acts on car hire complaints

We get more complaints from Which? members about aggressive sales, unauthorised and unexpected charges and appalling customer service in this industry than any other travel-related service.

The problems in the car hire industry may be complex, but they need fixing. That's why Which? Travel is joining forces with Telegraph Travel to investigate the major issues and find better ways to protect consumers. And we want to hear about your experiences.

We are focusing on three areas of the industry that need our attention:

The insurance hard sell

High insurance excesses (up to £2,500) are used as a way of inflating prices. If you don't pay to waive them, you could be hit with excessive charges for even the smallest scratch when you return the car. Worse still, unscrupulous staff use scare tactics to bully customers into buying a policy that can more than double the cost of hire.

It's never worth buying insurance at the car hire desk, you can buy a more comprehensive policy online at a fraction of the cost.Read our advice on car hire insurance.

Unauthorised and unfair charges

Unexpected and unexplained charges accounted for more than a quarter of the problems that car hire customers told us they had experienced. Customers were hit with spurious extra charges for cleaning, excess mileage, fuel and even admin.

And many people told us they had no idea about these charges until the checked their credit card statement when they returned home. Find out how to complain about unexpected car hire charges.

Dodgy damage repairs

You regularly tell us that car hire companies have over-charged you for accidental damage, or billed you for damage that you didn't cause in the first place.

And last year we found evidence of car hire companies overcharging by as much as 300% for repairs that were never made.