The UK Government has declared war on the private motor insurance market.

The Government has yet to decide who the enemy actually is, although one ethnic group ‘CFA referal collectors’ have been singled out for the death camps and news coming out of Westminster today confirms this.

The call for the ‘War on Car Insurance’ from the media and consumer led groups has reached deafening proportions recently and the UK Government will tell you they have been forced to act.

The AA have stated that the ‘average’ car insurance premium has risen by 40% and on the word of the AA and probably as a deflection away from the more pressing economic issues, battle has begun.

Government Forces Attack

First into battle yesterday for the Government, was the consumer watchdog the OFT (Office of Fair Trading). They have been asked by HQ to find out if the price rises are real and whether there are any (choke) anti competitive practices occuring in the UK private motor insurance market that may be pushing up prices.

To do this they have initially asked those thought to be contributing to the high costs of car insurance and will then ask the nation to contribute in an open call to arms, to publically air their grievances on car insurance price hikes, by filling in a form.

The OFT has asked all the suspects to contribute to the war effort or else stand accused of being part of the problem not the solution to higher car insurance premiums.

Most Wanted Suspects

1.  Price Comparison  Websites

2. Replacement Vehicle and Car Hire Companies

3. Approved Motor Vehicle Repairers.

4. Insurance Companies Products.

None of the major suspects is being pulled in for interrogation at this point in time. They have been given 5 weeks until October 12 to comply with the resolution or face shock and awe.

A spokesperson for the regime said’

“We will be engaging with participants in this market, trade bodies, the Government, regulatory agencies and consumer groups over the next five weeks by issuing information requests, arranging roundtable discussions and holding bilateral meetings.

Information requests:

• Questions for credit hire providers (pdf 96 kb)
• Questions for insurance companies (pdf 157 kb)
• Questions for vehicle repairers (pdf 97 kb)
• Questions to price comparison sites (pdf 93 kb)

We will also be inviting comments from consumers and other interested parties. The OFT is, however, unable as part of this study to address or advise consumers in this market on individual matters or complaints.

Any party that wishes to submit their written views, can e-mail motorinsurance@oft.gsi.gov.uk by 12 October 2011 or write to:

Private Motor Insurance Call For Evidence
Fourth Floor
Office of Fair Trading
Fleetbank House
2-6 Salisbury Square
London EC4Y 8JX “.

Second Front Opens with Pincer Movement

As soon as the OFT went into battle yesterday, it was immediately announced that the Government were opening up another front with a full out attack of its heavily armed praetorian guard, the FSA, against those supplying information to the enemy in return for money.

The practice is to be banned immediately it has been confirmed today, indicating that the government will take the side of Insurers against Lawyers. Questions of the legality of the war and the interfering with free trade could be raised at the international courts at a later date.

Tensions between Solicitors and Insurance Companies have been rising steadily over the last few years with Insurers furious about having to pick up massive bills for professional negligence by solicitors involved in mortgage and building surveying disputes. In many cases Solicitors PI premiums have been raised so high that many solicitors are now finding it impossible to practice.

Coupled with the massive amounts that the insurance companies are having to pay against public liability and employers liability claims for negligence, it appears the Insurance companies have finally had enough.

The number of car accidents involving personal injury claims is 31% down on the average for ten years prior, however the cost of personal injury claims has more than doubled from £7bn to £14bn in the past ten years and motor insurance premiums have risen at least 30% this year.

Insurance companies are blaming Conditional Fee Arrangements (CFA’s) or ‘No Win No Fee’ for the rising costs of car insurance. They argue that there is no disincentive, such as having to pay if you lose, that’s stops people making a claim if you have been injured in a car insurance accident.

The Government has stopped going as far as banning CFA’s completely, which would seriously impede that right to justice for the majority of the people in this country who cannot afford solicitors bills of £180 per hour +.

Today it has announced that those referring accident injury victims to solicitors and lawyers will be banned from receiving payment!

It also seems that the special relationship that UK Insurance companies have with UK Government through the ABI etc. appears stronger than that of the Law Society and Solicitors Regulation Authority (SRA) who traditionally only find allies in the other place, the House of Lords.

It also appears that the Government think that the Insurance Companies, who set the car insurance prices, are not actually responsible for their own pricing!

Insurance Blog will keep you abreast of all the developments as the war on car insurance unfolds. We will also be running a series of posts that examine in detail the questions being asked of the Motor Insurance Market.

Related posts:

1. Solicitors Are To Blame For Car Insurance Premium Hikes!
2. Car Insurance and Motor Insurance premiums reach record levels
3. FSA To Clampdown On Insurance Selling On The Internet In The UK

So what has gone so wrong? Why are we paying more for motor cover?

Well first we were told it was uninsured drivers, two million of them apparently, that were pushing up the costs of car insurance because the Insurance Companies were having to pay more into the collective fund, administered by the Motor Insurance Bureau, to cover the costs of claims against drivers with no cover.

So after much pressure from interested parties, the Continous Insurance Enforcement legislation has been passed but to date we see no evidence of reduced premiums.

Then we are told that criminal gangs (mostly johnny foreigners if the British press is to be believed) are fraudulently staging car crashes that are adding to claims costs. Given the amount that Insurance Companies have invested in detecting fraud in recent years, Insurance Blog cannot believe that these claims are more than marginal costs.

Next we are told that the actual reason for increasing  car insurance costs is the amount that has to be paid out in claims and held in reserve for personal injury claims due to road traffic accidents.

Could we be somewhere near the truth?  The problem with this is that given the latest figures, in 2009 the number of road accidents involving personal injury was 31% down on the average for 1994-98 primarily due to better car and road safety.

So it’s not the number of claims but the costs of claims. The cost of personal injury claims to Insurance companies has doubled in the last ten years from £7bn to £14bn.

So why are the costs of PI claims rising so fast and leading to expensive car insurance for us all?

Well Mr Jack Straw would have us believe that its all the fault of the Claims Management companies that have sprung up in recent years, the so called ambulance chasers. Claims management companies collect details of claims and typically sell these onto solicitors for a fee ranging from £100 to £1000 per case.

Mr Straw has called these a racket and demands that referral fees should be banned as was proposed by Lord Jackson in the 2009 report on court costs prepared for Mr Straw’s government.

Yes, maybe those who refer the accidents to the claims farmers for a fee such as the insurance companies themselves, hospitals, police and repair garages, should be denied the introducer fee but do you really believe that an extra hundred pounds or so is the reason for £7 billion pounds worth of extra claims expense? Who really is benefiting from these PI cases?

Insurance Blog thinks that this is all smoking mirrors, and that the real reasons for the increasing costs of claims and car insurance are something quite different, even though they are mentioned in the Jackson Report, and they are:

1) The ridiculous fees charged by Solicitors. How can any profession especially one that just creates more work for itself justify charging £150 to £200 per hour? Solicitors costs should be fixed for civil litigation as they are for criminal at around a quarter of what they currently charge. Civil Solicitors are the racket and social pariahs!

2) The question of proportionality. How on earth can the UK courts allow claimants to bring cases that run up solicitors and expert witness costs on both sides that are often 1000% more than the value of the claim. (see the figures in the Jackson Report appendices)

This is morally wrong and makes a joke of British Justice. No costs for both parties combined should ever be allowed to exceed the value of a claim and where an award for damages is less than the amount claimed then costs against the defence should not be awarded.

Mr Straw like when he was Home ‘Class B’ Secretary has failed to grasp the real facts and jumped on the populist bandwagon of lets attack the claims management companies and conditional fee arrangements (CFA).

Access to justice at a fair rate should be written into humans rights law and if you were injured you would be glad of a CFA. Because Solicitors charge exhorbitant rates, a CFA is often the only way to get justice if you’ve been injured by someone else.

As for cheaper car insurance, shop around, compare car insurance quotes and if you don’t want to pay more at renewal ask the Insurance company what its current claims exposure is!

Related posts:

1. Insurance Companies Blame 2009 Losses on Personal Accident & Bodily Injury Claims
2. Car Insurance Fraud puts £60 on every policy premium
3. UK Car Insurance Rates Must Harden As Loss Making Companies Claims Reserves Run Dry!

The role of a car insurance broker traditionally, is to act as an intermediary between the customer and the underwriting Insurance Company. Within this role there are various functions that they carry out in interaction both with the car insurance buying public and the Insurer with who they place the business.

When a broker places car and motor insurance risks on cover, their role has a major difference to other types of insurance in that the spread of risk is smaller. This is because a very high proportion of motor business is eventually placed on the basis of ‘one risk, one underwriter’ – that is to say, a Lloyd’s underwriter or Motor Insurance company.

When a member of the public goes to a motor insurance broker they expect that the broker should be fully aware of all the covers available and offered in a standard car insurance policy and a commercial motor policy. A broker also should be knowledgeable about the differences in policies and prices offered by the various Insurance Companies and underwriters with which his brokerage does business.

The Car Insurance Brokers role does not just stop with the supplying and purchasing of the insurance. They should be available to act as an intermediary with the Insurer at any time, acting upon the client’s behalf should there be any changes to the policy mid-term of the contract period, or to deal with any claims that need to be made.

The two main insurance areas dealt with by the car insurance broker are the private individual’s motor policy and the commercial fleet motor policy.

A marked tendency in the large broking house during recent years has been to concentrate more and more on the commercial motor insurance fleet placings, and less and less on the private sector of the market.

Many large international insurance brokers view the private motor insurance as uneconomic for a fully sustainable business, and so specialist sub-brokers or large provincial and regional brokers are dealing with a greater proportion of this class of motor business.

Car Insurance Brokers receive commissions for their role as intermediaries which are received from the Insurance companies with which the business is placed. The commissions available in the motor market varies somewhat and the recent ‘soft market’ where premiums and commissions are low, have also led the high street insurance broker to seek more profitable business in insurance classes other than Motor. Commissions for a car insurance policy may range from 7½ per cent to 20 per cent although with commercial vehicle contracts and large fleet business, brokerage may be agreed on a fee basis which is often charged over the whole portfolio for that particular client. In the past a standard rate or tariff which was agreed and reviewed by the Association of British Insurers professional body (ABI) was used in the UK car insurance market. This is no longer the case, but this approach still influences some underwriters in some specialist car insurance areas.

In recent years, however, many larger brokers have developed what is known as a ‘direct dealing account’. This is where the broker introduces a sub-broker to underwriters and then permits him to deal directly with them under a fronting agreement with their own marketing. The accounts, however, will still pass through the main broker. The commission is split between the main broker and the sub-broker, with the sub-broker usually commanding the higher percentage. An important restriction applied to the sub-broker within the fronting agreement is that he must pass the premium on to the main broker within 30 days of inception of the risk.

The role of the motor broker has changed somewhat in recent years with the development of Internet based quotation systems.

In particular the insurance comparison websites who have taken over the role of the broker to some extent. These quotation systems have been used successfully however by some car insurance brokers who have adapted and embraced the technology and now offer full on-line comparison quotes from their panels of insurance providers. The benefits are a very quick service, although it may still be advantageous for the broker to ‘shop around’ for the best deal for one’s client, particularly if the cover is for a non standard driver or car.

Whatever the changes in the technologies and methods of Car Insurance delivery there will always be clients who want a human face and to talk to someone directly about their insurance needs. The role of the broker is ultimately communication.

If a driver owns a classic car, specialist classic car insurance brokers will compare classic car insurance policies and rates on the customers behalf. Similarly if a customer has medical conditions or convictions or is a young driver that wants to drive a high performance sports car a Specialist Car Insurance Broker will be able to place the risk amongst their many schemes. A Broker is often the only option for non-standard motoring risks that the mainstream suppliers will not service.

Article Source: http://EzineArticles.com/?expert=Dave_Healey
http://EzineArticles.com/?The-Role-of-Car-Insurance-Brokers&id=4753910

Related posts:

1. UK Insurance Regulation Is Changing The Face Of The Market
2. Selling Your Insurance Broker Business? There’s never been a better time to sell!
3. Car Insurance and Motor Insurance premiums reach record levels

Well we knew our car insurance premium were always on the up but the results of the latest AA British Insurance Premium Index reveal that rates have actually reached an all time high.

In the final quarter of the year the average car insurance premium for an annual comprehensive car insurance policy increased by a whopping 7.2% on the previous quarter. In real terms this meant that the average premium is now priced at around £1,000.00 per year.

On an annual basis the percentage increase was 18.7% for comprehensive insurance. This is the largest increase in this area of business since the records first began back in 1994. Meanwhile the average premium for third party fire and theft increased in the same period by 8.9% to £1,252.00. Annually third party fire and theft rose by 23.8%.

The increases have come as auto insurers have desperately struggled to make up for a lack of reserves which have slowly been exhausted during the economic downturn. Other factors such as steep rises in settlement costs and an increase in the frequency of personal injury claims can also be attributed to the sociological effects of the recession and are also driving the premiums sky high.

The report has been released at a time that most composite insurers are either actively increasing rates or at least discussing it, but the strategies are varied and diverse.

Zurich have taken the impulsive decision to implement a blanket rate increase on its private motor book, a bold move which has certainly caught the market off guard. The Swiss insurer announced it intended to push forward with sharp increases in personal lines motor expected to be in the region of 20% in the broker channel.

Head of personal lines at Zurich’s broker division, Mark Coffey said: “We have not aimed our increases at specific brokers or segments of the market – they are right across the piece. The majority of the increase will come in March and the remainder will follow in April.”

He concluded “It is an industry problem – not specific to Zurich – so I will be intrigued to see how other insurers react.”

And they were queuing up to respond too…

An Aviva spokesperson commented that “no plans for blanket motor premium increases”. And added that “Aviva’s motor pricing strategy is still tailored to the individual – we seek to recognise better risks with more competitive pricing,”

A spokesperson for Car Insurance comparison website Car-Insurance.tv said, “ We’ve been predicting this for a long time now – the underwriting Insurance Companies can’t keep running on a loss and eating claims reserves ad infinitum.”

Meanwhile both Allianz and Axa indicated prior to Zurich’s move that they will be taking some form of corrective action also.

Gareth McChesney, head of pricing and reporting at Allianz Retail, said: “We applied some strength to our ratings in 2009. It seems others in the market are realising the severity of the situation – just six months later than we did.”

“In Q4 last year, the market started to correct itself and in 2010 I would expect to see that continue, certainly for the first half of the year. Zurich has put forward a hefty increase in a single month while the market is adopting slightly smaller increases, say 3-3.5%, every month to come up to an acceptable rating level,” he added.

Inevitable yes? Necessary pretty much? Helpful as we come out of recession? I let you answer that! From the pen of Insurance Blogger Kris Oldland.

Related posts:

1. The Hidden Costs of Uninsured Drivers in Your Car Insurance Premiums
2. UK Car Insurance Rates Must Harden As Loss Making Companies Claims Reserves Run Dry!
3. Payment Protection Insurance Claims and Premiums Rocket