The REAL Reasons your motor insurance has
been going up
1- Solvency
ii – a
requirement from January 2016 for insurers to hold more capital reserves (money
in the bank to meet claims and liabilities). So they can’t invest as much in
stocks & shares or buy shopping malls etc. Believe it or not, motor
insurers typically don’t make their money from simple underwriting profits
(collecting more in premiums than they pay out in claims) although many have
moved into this territory in recent years with Combined Operating Ratios (COR’s)
as low as 85% (meaning for every £1 they collect in premiums, 85p is paid out
in claims). Because they don’t have as much spare cash they can pump into
investments, this has caused them to look elsewhere for increased profits – yep
you guessed it – their customers; Crank up the premiums, crank up the profits!
2- People
wising up to the loyalty sham/ auto renewal fiasco. The insurance industry really is a
strange old bird. How many industries or businesses do you know that actually
kick a loyal customer in the shins by charging them more than a new customer?
Yes, it’s a strange one, but a fact that customers who allow their insurance to
auto-renew will generally be paying much more for the same policy than a new
customer. Many consumer champions such as Martin Lewis & MoneySavingExpert.com
have long advocated searching around for the best deal each year, rather than
letting your existing policy renew automatically. Millions of people have
enjoyed success with this approach and hit the price comparison sites to secure
the best deal. The knock on effect of this is that the insurers are starting to
see this pattern emerge and therefore the cheaper deals for new customers are
starting to dry up. Overall this then pushes up the average premium figure. It
is still worth shopping around though!
3- Modern
vehicles are becoming more expensive to repair, pushing up the cost of claims.
Modern vehicles bristle with technology, such as sensors in bumpers, adaptive
headlights, automatic parking systems etc. As more of us purchase newer
vehicles via PCP plans, the more modern the “rolling stock” of Britain’s roads
becomes and the more it costs to deal with repairs. Not a lot that can be done
about this one.
4- We
are in a “hard market”
As insurers are required to hold a lot more of their money as liquid cash and /
or very low risk investments to protect themselves from large catastrophes and
/ or crashes in the market. So the drop in value in the physical buildings they
own i.e. shopping centres and their other investments mean they have to
increase their cash reserves at the expense of their other investments.
The result of the contraction in their investments and increase cash reserves means Insurers are unable to accept so many customers. As the Insurers become more picky with the customers they accept and they charge a higher premium for the customers they accept.
The result of the contraction in their investments and increase cash reserves means Insurers are unable to accept so many customers. As the Insurers become more picky with the customers they accept and they charge a higher premium for the customers they accept.
5- Lack
of capacity in the market –
We had been in a soft market due to good investment returns which results in
new Insurers entering the market which force the premiums down (a price war).
When a recession or catastrophe hits, you enter a Hard Market and capacity
reduces, Insurers pull out of the markets and premiums go up as there are fewer
insurers competing with each other for the same customers
It works in a circle though, as the premiums go up in the hard market, it attracts new Insurers into the marketplace and investments tend to pick up. This completes the circle by forcing premiums down and you return to a Soft Market until the next trigger event. Recently a Gibraltar based insurer, Enterprise Insurance, went bust. So again, fewer insurers competing for the business and the remaining insurers can charge more or be picky about who they are willing to insure.
It works in a circle though, as the premiums go up in the hard market, it attracts new Insurers into the marketplace and investments tend to pick up. This completes the circle by forcing premiums down and you return to a Soft Market until the next trigger event. Recently a Gibraltar based insurer, Enterprise Insurance, went bust. So again, fewer insurers competing for the business and the remaining insurers can charge more or be picky about who they are willing to insure.
6- The
insurance industry are playing everyone for fools by blaming price rises on
fraud, whiplash claims and claims management companies. They have been jacking up the prices
based largely on the reasons already outlined above, but they want to blame the
problems on fraud and whiplash claims and claims management companies so that
they can lobby government for changes to avoid paying any legal costs on injury
claims with a value of less than £5k and even more dramatic than that, ban recovery
of compensation for whiplash. If the insurers succeed with their dream of not paying
legal costs on injury cases under £5k in value and abolishing whiplash, the savings
they create will be biblical. They promise these savings will be passed onto
consumers with reduced premiums, but they have already been caught out with this
in a recent article in The
Times, which challenged the previous savings promises had not been passed
on.
Be
under no illusion, the insurance industry are as hell bent on profits and
moulding the landscape in which they operate as the bankers. They are major
players in our economy and have a sympathetic ear from government, who listen
to the excuses as to why premiums have risen and take them as gospel. On many
occasions the insurers are asked to be transparent with their figures and data
on which they base their revelations and time and time again they are unable to
come up with transparent and credible data.
But
let’s be honest, there is a problem with fraud, but nowhere near the extent to
which the insurers bleat. There remains a system to deal with insurance fraud,
it is called the criminal justice system. If fraud arises, investigate it and
pass the evidence to the relevant authorities. Don’t deny all other UK citizens
their rights just because of the actions of a minority and the never ending
desire for greater profits.
Whiplash
does exist and it genuinely hurts and can affect people’s ability to work and
can disrupt their lives for months and even years afterwards. We live in a time
where government legislation now allows us to claim compensation due to a late
train or flight, causing some minor inconvenience for mere hours, yet get
injured in a road accident or at work and suffer limitations and restrictions
for months or longer and the insurance industry want your rights to claim
completely removed or for injured claimants to lose out by having to pay all
their legal fees from their damages.
Claims
Management Companies (CMC), yes there are good and bad examples out there. CMCs
do provide a helpful service and some are very well behaved. Others are an
utter nuisance and use automated diallers to pester people over and over again
or pressure them into making claims, promising them there is a pot of money
just set aside for them etc. There needs to be a tightening of the regulations
surrounding CMCs.
The
one key fact the insurance industry will routinely deny is that they are an
integral part of the problem they are claiming about. It is a dysfunctional
system that operates whereby insurers continue to cut each other’s throats by
passing their customers onto law firms they have a relationship with or vehicle
hire companies after non-fault accidents. Insurers are the biggest introducers
of claimants into the system due to their own claims capture activities.
As
a result of this, the insurer of the at-fault party has a more expensive day
out. This merry go round just repeats itself over & over again. Maybe the
insurers should come clean about the £millions they earn in commissions from
law firms, medical agencies & hire companies each year.
The
problem is they can blame the reasons for price rises on these issues and they
will get sympathy from government and support from the public as they can
relate to the nuisance call in the middle of East Enders or the press headlines
about whiplash claims and insurance scams which have been drip fed via the media
channels for years. Yet the problem is that if the insurers succeed in driving forwards
reforms to drive a large sector of the personal injury industry out of
business, the reasons for price hikes set out in points 1-5 will still be there
and there will be another excuse for the reasons your premium is going up. So
you will still be paying the same premiums, but you will have fewer rights if
you get injured and a more expensive time making any claim you are entitled to.
Meanwhile, expect another year of record profit announcements and dividend payments
by insurance companies.
Thank you so much for the information on Bumper Repair. Recently due to an accident my bumper got detached so it needed to be placed. I will go there for that. Thank you again.
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