UK's car insurance premiums on the rise again.

[ChrisKnottIns]

UK's car insurance premiums on the rise again.

For those interested, here's a copy of an article we wrote for the Saab Owners Club GB magazine in early February about the potential for insurance premium increases across the whole market.

"As we move into the year we know that Article 50 will be invoked by the PM and negotiations for our exit from the EU will begin. The EU has been blamed for much of the heavy regulation we see in UK industry. However, without influence from Europe, changes to personal injury claims are likely following a recent review by our own Ministry of Justice (MoJ) that will impact the current easy target – the motorist.

The government has already increased Insurance Premium Tax to 12% (effective from 1st June this year) and the proposed amendments to injury pay-outs are tipped to increase insurance costs further, particularly for those of us driving on the UK’s roads.

Currently, when a personal injury award is made the total is discounted by a factor (known as the Ogden Rate) to account for the expected additional return when the lump sum is invested by the recipient. We’re considering sums here that are awarded to cover loss of earnings, increased life-long care costs for someone majorly affected by an accident or even death. The Ogden Rate is designed to ensure that someone is not under- or over-compensated. At the moment this discount rate is set at 2.5% and it has been at this level since 2001.

The MoJ wants to reduce the discount rate to reflect the current interest rates, meaning that an insurer’s share of any pay-out would increase. The industry body, the Association of British Insurers (ABI), launched a legal challenge to the MoJ’s review in December on the basis that there has not been proper consultation but the High Court rejected the ABI’s concerns. ABI representatives say the reduction comes “at a time of significant global financial uncertainty” and one insurer’s analysis suggests that a 1% decrease in the Ogden Rate would wipe £190 million off its profits. Does this mean that insurers will want to pass on the costs to the policyholder? Most probably.

A decision is imminent, though the 30th January deadline has already been missed and an announcement has been promised, by the Lord Chancellor, for February. One thing’s for sure, this is a hot topic in the industry at the moment and the ramifications for insurers and, potentially, car insurance purchasers are greater than even the tax rise and the MoJ’s whiplash reforms."

On February 27th the Ogden Rate was indeed reduced, from 2.5% to -0.75%. The drop was much bigger than the industry expected and shares in motor insurance firms plummeted on announcement. It now looks like our prediction was correct and rates are beginning to rise across the board.

Rest assured, at Chris Knott Insurance we'll still be doing all we can to find you the best car insurance deals out there. As your existing provider increases their rates please call us to see if we can offer you something better under our privileged club/forum scheme for enthusiasts.

QUOTELINE: 0800 023 4374

best,
Nick

PS. As an aside, there is equal implication for the NHS as medical malpractice claims also use the Ogden Rate to calculate compensation.

[Dancake]

From the end users perspective, it still appears that insurance companies are being greedy. Not content with making 'X' amount of millions in pure PROFIT, they decide to increase the premiums to maintain their profit margin. This of course appeases the shareholders, who don't give a toss about the end user. What insurance companies have here is a licence to print money, with policy quotes being conjured out of thin air. If car insurance companies actually cared about their supposed core beliefs, they wouldn't concentrate so much on profits. You said it yourself, the motorists are easy targets, and the hypocrisy of your statement is unbelievable.

[ChrisKnottIns]

I don't see the hypocrisy - we're brokers so we're not the guys setting the rates or making those big profits - we sit between you and the insurers to find you the best deals from what's available at the time. And actually, the insurers and their representative bodies are lobbying the Chancellor on the basis that this is unfair to the consumer - http://www.bbc.co.uk/news/business-39122756

I also think it's a bit harsh to suggest rates are plucked from thin air when there are complicated rating structures in place which,among other things, take account of insurers' claims experience and customer risk profiling.

[Dancake]

Brokers, i.e. the middle men, adding additional cost to peoples premiums that doesn't need to be there. It's not harsh in the slightest to suggest that figures are plucked from thin air. How can an insurer tell you that they're being reasonable by discounting your first premium by 70%, because instead of being £21,000 they're very kindly willing to reduce it to £6300? Then any subsequent discounts are taken from the original £21,000 quote? So there are people out there who will always pay differently for their premiums because the original manufactured figure varies so substantially, even though they're the same age, with the same driving experience living in the same area?

There are serious flaws within the system for consumers, but these flaws seem to assist with lining the pockets of insurance companies and brokers.

[ChrisKnottIns]

Same areas and age maybe but same street, same job, same car (down to exact make/model/YOM, same modifications (or none), same overnight parking arrangements, same driving history/experience, same bonus, same convictions, same mileage split between SD&P, commuting and business use, same marital status, same number of drivers with identical risk details?

There are many factors that contribute to the final cost and you can't assume that your quote will replicate those of your neighbour's.

[Dancake]

I understand that, but like for like insurance quotes vary so much that one can only assume the figures are made up.

Parking arrangements - Should not apply to insurance quotes. You're discriminating against the less privileged. Those who haven't got off street parking or a garage etc.

Address - Should not apply to insurance quotes. Again you're discriminating against those who haven't been lucky enough to end up living in an enviable postcode. Even the most notorious postcodes have lots of very decent people in them. These people are paying an increased premium because of a minority of people who have no aversion to breaking the law. It's active discrimination. Putting everyone under the same blanket rather than individually assessing merits. It's a disgrace. Insurance companies are happy for this to continue, because they are making more money out of people who don't commit motor related crimes than they are paying out to cover those who have commited motoring offences.

Age - Another thing that should never be applied to insurance quotes, and another classic case of active discrimination. I can just picture the insurance companies board meetings, and the feeling of warmth that must coarse through the veins of those attending when they realise that they still get away with age discrimination. It's a complete farce. How do insurance companies evaluate individual drivers skills? Asking for a pass plus certificate is nonsense. They're too easy to get, and should in no way reflect premium prices either.

Social, domestic, pleasure and business - A complete and total load of nonsense where I'm concerned. People want to insure their cars to use them. Why should it matter what they're using them for? Just another excuse to make money.

Marital status - Should not factor in insurance quotes. Why should marriage factor? Statistically there's probably some emotional trigger during the process of getting married that makes married couples less likely to take risks. Some married couples I know are absolute psychopaths. Just because someone is married doesn't make them any less of a risk. In fact I would argue that they are even more of a risk, as emotions can run high when things aren't going right.

Individual risk - How is this actually worked out? There's no way at all to figure out the risk that an individual poses. Once again statistics are applied in the favour of insurance companies. Are most accidents as a result of risks, or as a result of bad driving?

[ChrisKnottIns]

I'll just take parking arrangements as an example: Insurers have differing views on this based on their own experience.

If you park on the road, it's more likely to get a ding overnight than if it was on your driveway - will the driver tell you or drive on? Will they know which door to knock on? Likely result: a claim on your own policy.

Conversely, if it's parked on the road it's harder for thieves to know which house to break into for the keys. Park on the drive and they'll know. Park in the garage and the perceived risk of fire damage from a building fire may have an impact.

Each insurer has to take their own view on what's a positive and what's a negative.

[Dancake]

Therin lies the problem. There's too much leeway in terms of interpretation. More clarity and transparency required. Less discrimination and more taking care of the majority of customers who don't claim. Anyone who does claim and gets found out that it's a false claim should be banned from driving. Their actions shouldn't affect a premium increases for everyone else.

The cost of repairing dings and dents is ridiculously high, and for some reason insurance companies insist that people use their approved repairers. Approved repairers? You mean that garage that had enough money to buy the contract in the first place, because it knows that the first 10 repairs will cover the initial outlay? Funny because the small independant body shop round the corner could do the same job for half the price. Strange way of operating if you ask me. Having to be vat registered is another joke. Some of us are in the trade, and are more than capable of repairing vehicles to a better standard than these so called approved repair shops, yet it doesn't cut the mustard where insurance companies are concerned? Sorry but it must cost at least £2000 for us to be satisfied that a decent repair has been actioned? Madness.

Another question I'd like to ask if you wouldnt mind answering, is why does a persons job affect their premium price?

[ChrisKnottIns]

You're welcome to use your own choice of repairer under our scheme - you're not tied to the insurer's, so that's a non-issue for us.

On the question of occupation, for example there are some riskier occupations that the insurers on our panel won't cover at all such as scaffholders, door staff, professional sportspersons, etc, so yes it certainly affects the acceptance of you as a risk.

[Dancake]

Does that not seem like discrimination to you?