UK Car Insurance Rates Must Harden As Loss Making Companies Claims Reserves Run Dry!
Incredibly Car Insurance companies in the UK are struggling to make a profit and 2010 is likely to see a large reduction in the supply of car insurance, with many famous brands and suppliers predicted to disappear from the high street and our television screens as the market adjusts to cater for the massive losses, according to analysts from car insurance comparison website Car-Insurance.tv.
Recently released figures show that the UK Motor Insurance market has been consistently losing money since 2004 when the total UK profit from underwriting car insurance policies was £77 million.
In 2007 the UK car insurance market made a £1.1 billion underwriting loss, last year the loss was £1.3 billion and the figures for 2009 are expected to be worse........
Very few car insurance providers have escaped the losses and are profitable, whilst many have released claims reserves held from previous profitable years to disguise the 'actual ' loss.
So what is causing such massive losses in a large compulsory market that not so long ago was the most aggressive in the world?
On the face of it the answer appears to be simple ...... The Cost of Claims!
Claims are the problem not because the Car Insurance Companies have failed to include the rising costs of claims into their pricing structures; but because they have failed to cover the true costs in the retail price!
Car Insurance underwriters seem to have forgotten the basic rules of betting when setting their prices - and that is, that the Bookie never loses.......
To understand where the car insurance underwriting companies have gone wrong you first need to examine how they arrive at the price of a car insurance policy premium.
The cost of your car insurance premium is basically made up of three components:
1. The costs of production - Staff, Systems, Distribution etc
2. The costs of losses - known claims ratios ( the proportion of a policy premium pool that gets eaten up in claims)
3. Profit
The cost of all these components can be calculated by clever people called actuaries who work for the insurance companies and the rates set accordingly.
So what's gone wrong?
Well naturally it is obvious to first look at claims as the cause of the losses - but the truth is far from this end of the life of a car insurance policy......
The frequency of claims has either fallen or remained fairly constant over the period of losses and the actual cost of claims has only risen by 1 percent.
Despite all the noise made about gangs of car insurance claims fraudsters roaming the streets of the UK, the fact of the matter is that most of this is propoganda aimed at deterring fraud which naturally rises during a recession/depression. The number of fraud cases are really insignificant in the true scale of the market to affect pricing.
Admittedly there has been a significant increase in the number of personal injury related claims, egged on by claims farming companies, which would affect long term pricing, however the losses experienced by Car Insurance companies are nothing to do with claims and claims pricing.
These type of claims fluctuations have always been dealt with successfully in the past by car insurance companies by adjusting reserve ratios or negotiating better re-insurance ( laying the risk off), or more importantly by adjusting price ........
But this time something is different....
Car Insurance Companies can no longer set the price! Not if they want to win the business anyway!
And they certainly cannot sell policies at the premium levels that the Actuaries suggest!
Why? Seemple .......The Internet!
And more importantly Car Insurance Price Comparison websites or aggregators as they are known in the industry, which account for around 90 percent of the Car Insurance sold online. Since around 2004 it has been possible to easily compare car insurance quotes online from numerous suppliers, and invariably the cheapest premium wins the business.
Car Insurance companies not longer set their own prices! And this is the problem!
In a race to achieve enough volume to make a book of car insurance business profitable the car insurance companies have been selling their car insurance polices too cheap and covering their losses with their claims reserves........time is running out!
Cheap Classic Car Insurance Cover By car insurance specialist blogger and expert Dave Healey
Do you own a car over fifteen years old? Do you own a car which could be considered a classic? If you do you may well be entitled to cover it under what is known in the industry as a classic car insurance policy. In the past there were many more restrictions on cover under this type of policy and specialist motor insurance brokers and insurance companies were very particular about the type, age make and models of the cars they wished to cover on their books.
Times have changed and technology has led to many more cars now fitting into a bracket that was once reserved for the glamourous, collector and vintage car owners. It is now possible to obtain both cheap quotes and classic car covers online from many providers including the majority of those famous high street brands, who have realised that nearly fifty percent of the cars on the road now fall within the strict underwriting parameters for classic car policies. Consequently premiums in this market, which were always cheaper than standard cover, have become much more competitive in recent years, with the entry into the market of many of the larger insurance companies.
When searching for the right covers it is wise to get a range of classic car insurance online quotes from various different sources. Not all motor companies are the same, and neither are all classic policy conditions.
When applying for a classic quote you should be aware of the varying limits of cover and restrictions that may be put on driving the vehicle. For example many of these policies will only allow you very limited road mileage each year, sometimes as little as 3000 miles per annum. This is fine if you have an expensive collectors car that is garaged throughout the year and only taken out for the odd cruise or rally. The problems occur much more frequently when non valuable classic cars are insured under this type of policy when they should really be covered under a more embracing standard motor insurance. Unfortunately, restrictive policy conditions often only come to light after an accident and a claim is made, rejected by the insurer and leaves the policyholder feeling missold and abandoned.
If you have decided that a classic car policy is right for your car, then when applying for quotes online always check that the policy is right for you, the owner as well. Many policies are designed to charge by the lifestyle of the insured and as with all car insurance there is a tendency for cover to be cheaper for older persons and women drivers. Many companies will not issue classic motor insurance to persons under the age of twenty five, although this is changing as well, and there are some very good providers out there who will cover drivers as young as twenty one.
If the value of the car is not particularly high and the replacement costs of parts and repairs does not warrant a specialist policy, you may well be better advised to seek out quotes from a mainstream insurance company. They often have additional online discounts and offers which the classic policy providers are not in a position to offer.
As with all car insurance, what may initially appear cheap at policy inception could cause some unpleasant surprises when it comes to making a claim. After all you only buy car insurance to protect yourself in the event of a claim and a policy is only as gfood as it's claims service!
Shop around for specialist car insurance and Compare Classic Car Insurance. Compare prices and insurance covers from both major high street brands and the smaller insurance specialists to ensure you not only get a good deal, but get the adequate levels of cover you require for your classic car, as well.
Cheap Car Insurance Could Land You In Jail! or Banned for Life!
LONDON - UK Car Insurance comparison website Car-Insurance.tv is warning drivers to be very careful when applying for cheap car insurance.......
Car Insurance Fraud has been on the rise in the UK for the last few years. One could argue disproportionately due to the influx of Eastern European criminal gangs staging road accidents, however the current recession has seen suspected cases of car insurance fraud rise to unprecedented levels, sometimes in very unusual areas.
One worrying factor is the trend to obtain cheap car insurance by 'lying' on the online proposal form or over the phone. Much cheaper car insurance premiums can be obtained by those who lie, omit, or deliberately falsely declare information when applying for cover.
Insurance Blogger has even seen some websites encouraging this type of behaviour!
The savvy public looking to save a few pounds will bend the truth to obtain cheaper premiums as a recent case that appeared before Bridlington Magistrates in Yorkshire demonstrates..
A driver of green Ford Fiesta, a Mr Pears aged 24 of Bridlington was found to have been behind the wheel of his car without valid business insurance and was using the vehicle for business purposes without the appropriate insurance cover in place.
The court heard that when police routinely stopped the vehicle, they noticed that Pears had a number of insulated pizza bags on the front passenger seat. He explained he had just begun working as a pizza delivery driver on a trial basis that day.
Although he was able to produce a valid insurance policy for the car, a quick search of the Motor Insurance Database by the police officers at the scene revealed that the policy had a usage type of SDP and only covered him for social, domestic and pleasure use of the car and excluded business use, the bench heard.
Pears was fined £525 and had his driving licence endorsed with six penalty points. Costs of £40 and a £15 victim surcharge were also imposed.
What this goes to show is that if you are caught.. and you will be! Your car insurance for the future will never be Cheap! Indeed you may not even be able to get cover again once you have commited Insurance Fraud!
It could amount to a lifetime Driving Ban!
Cheap car insurance can be obtained legally by comparing car insurance quotes from many suppliers and by answering the questions truthfully, on one form.
12 Car Insurance Money Saving Tips For Much Cheaper Premiums
12 Car Insurance Money Saving Tips For Much Cheaper Quotes and Premiums By resident expert Dave Healey
It can be quite a daunting experience trying to purchase car insurance, and with the myriad of products and sales channels available today, it is often difficult to know where to start the process. It can be even more complicated when you start to look to reduce your premiums without sacrificing either your levels of cover or increasing your risk.
As most motor insurance is basically rated by your birth date and age, and your postcode or zip code, short of moving property or growing older, it often appears that reducing your vehicle insurance premiums is an impossible task.
This is not necessarily so! Whichever method or distribution outlet you use to purchase car insurance, if you consider these twelve money saving tips, implementation of any one will virtually guarantee a reduction to your premiums at both onset of a policy or at renewal. By simply making changes to any one of these premium rating factors that go to make up the quotes you are given, will result in an alternative quote which should be to your favour.
The money saving tips explained
Before we start remember - Don't automatically renew your policy with the same company. It is virtually guaranteed that you could get like for like cover cheaper with another insurance company if you shop around and compare covers and prices from different providers.
1. Investigate on the Internet - Visit different suppliers
If you were getting paid at least £150 or $200 for two hours work, you should be pleased. That is the minimum you should look to save on your annual premiums by spending a couple of hours shopping around for quotes on the Internet.
Visit a car insurance supermarket comparison site. If the premiums are too expensive but you like the cover offered by a particular insurance company then, visit the supplier direct and cut out the expense of the middleman.
The large motor insurance comparison sites you see advertised all the time on television will send you off to the suppliers site themselves to complete 'the deal', so its best to close down the application, clear the cookies from your browsers memory to ensure that you are not charged their commission inclusive rates, and visit the insurance company direct.
Additionally you should visit a specialist auto insurance scheme provider. These were once only available on the High Street but are now springing up everywhere online. No matter what your particular individual needs, be it lady driver cover or perhaps classic car cover, specialist car insurance providers by their very nature usually offer cheaper quotes as they benefit from the economies of scale allowed by group buying of cover.
2. Do your research
Who is offering deals on television at the moment? Everybody who seeks motor insurance is an individual with a different car and individual cover needs dependant upon their circumstances. Write down what you think your exact cover needs are and think about where you might find providers for your individual needs. For example, if are you a senior citizen, you should search on the Internet for specialist car insurance schemes for over fifties.
3. Go for a no frills policy
If you are not worried about quality of cover and only require basic road risks, go for one of the many policies now being offered by insurance supermarkets as 'value car insurance'. These policies usually only offer the very basics of cover required under the Road Traffic Act, however may be very suitable for low mileage, cheap cars and younger drivers.
4. Only get cover for what you need
Why pay for car breakdown insurance or other sometimes hidden extras such as the cost of including a replacement vehicle should you have an accident, when you already have AA breakdown cover and another car sitting on the driveway at home that you could use. Check your existing policy cover details carefully and exclude all unnecessary or duplicate covers.
5. Take on the risk yourself
With Car Insurance you have two basic options for taking more of the risk on yourself. These being, one by choosing how much cover you require in the first place, that is, either comprehensive or third party, perhaps with the fire and theft options included. Secondly you are given the option on most systems to choose how much of the cost of damages of an accident you are prepared to take on board yourself, before you call on the insurance company to make a claim. This is known as the voluntary excess and is the amount that will always be deducted first from any amount you claim. If the cost of repairs of an accident are not much more than the voluntary excess amount you have chosen then it would be prudent to pay for the repair costs yourself, rather than lose your no claims bonus.
6. Reduce the cars risk with improved car and location security
If you park your car off road or garage it at night you will receive further discounts. If you own a classic car which does not have them fitted as standard, fitting security devices, for example car alarms, immobilizers and GPS trackers to your car will substantially reduce your premium
7. Improve your driving or change your lifestyle
If you need to make a claim because of the way you drive, or if you have more than one SP30 for speeding, your premiums are going to be heavily loaded at renewal. You can reduce your insurance costs therefore by improving the way you use your car or changing your lifestyle.
8. Cut down on your Car's Usage
By thinking about how you use your car and reducing unnecessary journeys you will be cutting down on your cars usage and by implication the risk you present to an underwriter. Check how many miles you run up each year and make sure that this is what you are paying for! Do not make a false mileage declaration in an attempt to save money because in the event of a claim, your mileage and MOT if applicable will be noted by a claims assessor. If there is significant difference between the declared mileage and the actual amount you have driven, you risk having the claim refused or seriously reduced in value.
9. Pay the full premium amount upfront
Most UK insurance companies charge additional costs for handling monthly direct debit payments. There is often a five to ten percent effective discount if you pay immediately online or over the phone by debit card.
Investigate insurance specialists that target specific groups of people of car type, for example performance motor insurance or cover for young drivers. These schemes offer with unique policy options and cover modified for the particular specialist driver group. They are often far cheaper than standardised covers offered by comparison sites as they have group bulk buying economies of scale regarding underwriting and claims and a known risk pool of similar types of people and car.
11. Join a Car club
Many car owners clubs and specialist marques clubs have special affinity group rates for specialist car insurance schemes. The cost of getting membership of these clubs can often be less than the five to ten percent savings you can make on your premiums by joining such a scheme.
12. Take an Advanced Driving Course
You can save a further large percentage with most online insurance companies if you have taken an advanced driving skills course or ADC. The courses are run nationally and the cost of the course is outweighed by the annual savings you will make on your insurance premiums. The savings are greater for young drivers and this is one of the few positive actions that a young driver can make to reduce his or her annual vehicle insurance costs.
And Finally - Haggle!
And here's an extra tip which we often find works when all else fails. Complete a quote on the Internet for the policy you desire with the company you like. Do not complete the quote beyond the screen where the premium prices are displayed, merely save the quote reference number. Quotes are usually legally binding for thirty days.
Leave it a while then pick up the phone and call the insurance company. Tell them that you've had problems completing the quote online. They will ask you the quote reference number and then have all you details in front of them. When they tell you the quote amount (which you should know already), tell them that you've got a quote that is, say a hundred cheaper at so and so company, and ask if that's the best they can do. Just by haggling you will be surprised just how much you could save on your car insurance costs!
One way that Insurance Blogger keeps his nose to the ground to find out what the latest 'buzz' is in the grey insurance world is to check out the latest insurance articles online. Articles have been a major part of many an insurance company marketing department for the last few years, and the need for quality in order to get them published has led to a very high standard of debate and expertism, with an need for unique quality content in order to make the exercise worthwhile.
So stumbling around over at one of the largest repositories of knowledge ezinearticles.com I was really surprised by the number of expert authors I knew or have met over the years all imparting their knowledge in an acceptable marketing fashion - Going through the list it's like...
'God whatever became of them and dont they know so and so'
As a driver of many a classic car over the years I was pleased to see an article by an old mate from the city Dave Healey whose an expert in specialist motor underwriting and sort of sees things from a cars point of view........
Here's an excerpt
'Most specialist motor underwriters therefore appreciate that you may need a more tailored and flexible type of car insurance for a classic car, one that allows you to fit the policy around what is effectively your lifestyle risk. Your risk levels are calculated upon the way you use the classic car and the number of miles distance you cover in that car each year.'
He talks about how changes in your lifestyle are reflected in the costs of your car insurance premium calculation, and how changes you make could save you money.
How to save money on Car Insurance without reducing cover
According to the Times Online the credit-crunched British public plan to cut back on insurance policies this year in a bid to limit spending.....
More than a million customers have already reduced their insurance cover, saying they simply cannot afford it, according to a survey by insurer LV, until recently known as Liverpool Victoria.
Insurance Blogger wonders if the public are just becoming more savvy and shopping around online. It's an easy excuse to use in the current economic climate and nobody questions it when they get put on the spot by a phone call out of the blue asking them why they didn't renew!
Another five million Britons plan to cut their cover to try to save money over the coming 12 months, the LV poll of just 2,141 clients reveals, say the Times.
Surprisingly they beleive that 37 per cent of people are considering downgrading their car insurance. LV state that on average, those planning to cut their insurance cover this year believe they will save £125 over the course of the year, or £10.41 a month.
Come On! we know money is tight but do households really do the sums to the n'th degree, or maybe their current insurer is overcharging by that amount!
LV= properly point out that "cancelling or reducing essential insurance cover could result in many people finding themselves seriously out of pocket if something untoward happens. It is at time likes these, when money is short, that insurance becomes evermore important.”
There are legitimate ways of reducing your car insurance costs, such as increasing your excess or making lifestyle changes such as increasing your security or decreasing your annual mileage, which will save money by reducing premiums without reducing your levels of cover.
Shop around on the Internet and check out specialist car insurance schemes that offer cover tailormade to your lifestyle and / or motor, which is more than not often cheaper than the standrard offering to everyone available through the large comparison sites.
Motorists found driving without car insurance could risk a fine of £5,000, disqualification and the car being seized and crushed by the police.
The car industry is suffering very badly globally, and in the UK large manufacturing bases involved in car assembly and production and all the associated small businesses that play support functions, have brought unemployment and lay-offs to towns as far apart as Swindon and Gateshead. The Government has stepped in to help again, this time to support multi-nationals rather than the ailing car industries of the seventies and early eighties, and although we don't agree with underwriting failing foreign businesses, the social and economic investments in these areas must be protected.
So with new car production ground to a halt and demand stagnant, it is surprising to see that the second hand market is experiencing a mini upturn. Prices have been dropping steadily on used cars in parallel to the housing slide, however recent activity has seen much larger market movements with the volume of used car sales up. This surge has seen a response from the standard car insurers, who seem to be the only companies whose TV advertising campaigns have been unaffected by the recession. This market would be even more buoyant if the availability of loans for used cars was not as restricted as it currently is. One growth area has recently been classic car insurance. These days many cars as young as ten years old can be considered classics and it is worth getting some insurance quotes from a online classic car insurance specialist such as Lancaster.
Classic car insurance policies often provide better cover as the risk is assessed for the particular vehicle and the premium assessed against a known sum insured - what you'll get back if you write the vehicle off.
If you've ever been frustrated when using one of the so called car insurance aggregator or comparison sites, often being sent off to another site and repeating the details you've already typed in - then you'll be refreshed by a new entrant to the market that can provide you with a cheap car insurance quote and buy in under three minutes.
Specialist car Insurer, Lancaster Insurance, has teamed up with specialist insurance systems company Insuretec Ltd to produce the system that will find you the best deal from over fifty car insurance schemes. Whether you're a young, lady, over fifty, performance car or classic car driver, the site will find you the best car insurance deal available for your needs.
Insurance Blog is dedicated to all things happening in the Insurance World. From tips on where to get the best insurance deals to news from the Insurance Industry, you'll find answers at Insurance Blog
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