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?
The European Court of Justice’s new ruling that sex discrimination is no longer a valid means of calculating the cost of insurance is going to have a huge impact on the insurance industry practice as a whole, but specifically when it comes to car insurance, and premiums across the board as well.
With women set to pay an average of 25% more than they do now, and men seeing an average 10% decrease 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.
The car insurance comparison website estimates that 1.7bn per year is lost collectively by the UK’s 6.3 million drivers, simply because consumers don’t shop around for their car insurance. An insurance expert for the comparison site giant, Peter Harrison, believes that we’re an apathetic nation when it comes to 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.”
The problem of uninsured driver accidents is also a huge contributory factor to the rising cost of our car insurance. The British Insurance Brokers’ Association (BIBA), who has itself been lobbying for a regulatory system since 2004, estimates that it costs every policyholder an average of 30 per year, and that 160 are killed and 22,000 injured every year, all at the hands of uninsured drivers.
According to the MID, the UK also has one of the worst records in Europe for uninsured driving. Costing the nation’s drivers a whopping 500m per year, an estimated one in twenty cars on the road is driven either completely without or incorrect (and therefore invalid) insurance.
A new Act due to come into effect in April 2011 though, is aiming to deal with the problem. The Continuous Insurance Enforcement Act will mean that cars may no longer be owned without either insuring them first or registering their vehicles with a Statutory Off Road Notice (SORN). This means that even those owners whose cars remain physically off the road, in the garage or on the drive (even if it’s jacked up on bricks and without vital components), will be breaking the law if they haven’t either insured it or applied for a SORN.
While the Act has been welcomed by many, concerns that it doesn’t quite go far enough have been voiced by some. Direct Line’s Andy Goldby, director of motor underwriting for example 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 huge cost incurred by car insurance policyholders is that generated by accident claims and the burgeoning personal injury lawyer business.
Insurers claim they are paying out more than they are taking in, with a survey carried out by industry experts EMB and actuarial consultancy revealing that in 2009, for every 1 the retail motor industry received in premiums, it had to pay out 1.20 in costs and claims, making 2009 one of the industry’s most costly years on record.
A different report, again 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.”
Statistics show that 341,592 people were killed or injured in 1989, compared with 222,146 people were killed or injured on Britain’s roads in 2009, highlighting that the increase in costs just doesn’t add up.
The Jackson Report, published in January 2011, found that personal injury claims now account for an astonishing 50 per cent of the cost of our car insurance premiums. Insurance premiums increased by 40 per cent in 2010 and are set to see a further increase of 20 per cent in the year ahead.
So now, more than ever, it’s essential that you make sure your insurance provider is giving you the best value on the market.
MoneySuperMarket car insurance for young drivers is the place to find the best prices and deals - so get online now!