With cars having always been a generally expensive commodity anyway, the economic downturn has really seen drivers suffer. The last few years have also seen the price of pretty much everything grow, not only has car insurance risen over the last year, having increased at a rate of 40 pence per day, but we have seen a significant increase in the price of fuel as well, paying an average of 15.8p per litre more than we were only a year ago. But why?
It’s likely that you will by now have heard about the European Court of Justice’s new ruling that sex discrimination is no longer a valid means of calculating the cost of insurance, which is going to have a massive impact on insurance industry practice and our premiums across the board - especially, though, when it comes to car insurance.
Women are set to pay an average of 25 per-cent more than they do now, and men seeing an average 10 per-cent reduction on their insurance, it’s more important than ever to make sure you find the most competitive insurance company in business.
When it comes to companies like car insurance comparison websites like moneysupermarket.com, they can provide help and info about any price hikes in the industry by using their car insurance comparison tool - the great thing about it is that you just have to enter your details once and they do all the searching and hard work for you by obtaining quotes from over 50 car insurance companies. This relieves you from having to obtain quotes from lots of different companies. When the time comes for you to renew your policy, and so there’s absolutely no excuse for just remaining with your current insurer and paying the hefty price.
Peter Harrison, an insurance expert for the comparison site, believes that we’re an apathetic nation when shopping around for car insurance: “Insurers count on customer apathy to reap the profits, so it is alarming so many motorists are prepared to waste their hard-earned cash by not looking for a better deal”. MoneySuperMarket estimates the UK’s 6.3 million drivers lose around 1.7bn per year collectively because consumers don’t shop around for their car insurance.
Another contributing factor to the rising cost of our car insurance is the problem of uninsured driver accidents. The British Insurance Brokers’ Association (BIBA), who has itself been lobbying for a regulatory system since 2004, calculates that it costs policyholders an average of 30 a year, and that 160 are killed and 22,000 injured every year, all at the hands of uninsured drivers.
Additionally, the UK has one of the worst records in Europe for uninsured driving, according to the MID. An estimated 1 in 20 cars on the road is driven either completely without or incorrect (and therefore invalid) insurance, costing the nation’s drivers an incredible 500m per year.
Fortunately, a new Act called the Continuous Insurance Enforcement Act is aiming to deal with the problem. This will mean that cars can no longer be owned without either registering their vehicles with a Statutory Off Road Notice (SORN) or insuring them. This means that even those owners whose vehicle remains physically off the road on the drive or in the garage (even if it’s jacked up on bricks and without vital components), will be breaking the law if they haven’t applied for a SORN or insured it. The new act is due to come into effect in April 2011.
However, while the Act has been welcomed by many, concerns that it doesn’t go far enough have been voiced by some. For example Direct Line’s Andy Goldby, director of motor underwriting, has commented: “We welcome this initiative, but with uninsured drivers costing British society around 500m each year, the severity of penalties must act as a deterrent to those considering driving without insurance.”
After all, what’s the point of imposing a 300 fine on somebody who would have had to pay over 2,000 in the first place for their insurance? It remains to be seen whether or not this act will have a positive effect on the cost of car insurance.
Another massive cost incurred by car insurance policyholders is that generated by accident claims and the expanding personal injury lawyer business.
Insurers claim they are having to pay out more than they are taking in, and a survey carried out by actuarial consultancy and industry experts EMB revealing that in 2009, the retail motor industry paid out 1.20 in costs and claims for every 1 received in premiums, making 2009 one of the industry’s least profitable years on record.
Another report from EMB, presented to the Commons Transport Select Committee in 2010, said: “Over 40 per cent of personal injury lawyers pay referral fees to receive work from insurers or claims management firms. Fees range from 200 to 1,000 per referral.”
The report also stated: “In our view, the biggest single factor driving price increases is the burgeoning cost of bodily injury claims… We estimate that twenty years ago bodily injury claims accounted for around 20 per cent of UK motor insurance claims costs. In 2010 we now estimate that proportion to be 50 per cent.”
Figures show that 341,592 people were killed or injured on Britain’s roads in 1989, compared with 222,146 people in 2009, highlighting that the increase in costs just doesn’t add up.
Published in January 2011, the Jackson Report, found that insurance premiums increased by 40% in 2010, and are set to see a further increase of 20% in the year ahead. Personal injury claims now account for an astonishing 50% of the cost of our car insurance premiums.
So now, more than ever, it’s essential that you make sure your insurance provider is giving you the best value on the market.
For additional info on cheap car insurance for young drivers from moneysupermarket, head over to their website now!