Why your car insurance is costing you more

You may remember back in November we reported on the government’s inquiry into the rising cost of car insurance.

Confused.com’s very own head of motor insurance, Will Thomas, gave evidence to the committee, which grilled several insurance industry representatives on the reasons for the dramatic rise in car insurance premiums over the last year.

Well, last week, the Transport Select Committee met again, this time to hear more evidence from a panel that included representatives from the police, the Association of Personal Injury Lawyers, the Claims Management Industry and the Transport Secretary, Mike Penning.

So if you want to know why your car is now more expensive to insure, read on.

 

Uninsured drivers

Fraud was a big discussion topic at this inquiry, just as it was at the first one and uninsured drivers were blamed for adding £30 to the annual cost of every motor insurance policy. Speaking at the inquiry, chief superintendent Geraint Anwyl, of the Association of Chief Police Officers' roads policing section said car insurance fraud has become "highly organised and very profitable."  He estimated that there are 1 million uninsured drivers on Britain’s roads today, which insured drivers are paying for.

Staged accidents and “crash for cash” claims are now blamed for a 50 per cent rise in the number of cases insurers are investigating.

But Anwyl admitted that police forces and the Crown Prosecution Service did not have the money or resources to prosecute small-scale fraud cases and suggested that insurance companies fund dedicated insurance fraud teams within the police to help them bring these cases to court.

The problem is so rife that a new Continuous Insurance Enforcement law, which was incidentally announced on the day of this hearing, is now in place. It means all vehicles have to be insured, even if they’re not driven.

Personal Injury Claims - access to justice and the compensation culture

The committee heard that, at the moment, all that a claimant needs in order to make a compensation claim is basic medical confirmation reporting that they have suffered in some way relating to the incident.  And it seems it’s difficult and expensive for insurers to disprove, resulting in escalating payouts.

All you have to do is switch the T.V on and you’re bombarded with no-win, no-fee adverts and companies offering to help to fight your cause, even if the accident happened years ago. I’ve even had texts offering to get me compensation – and I haven’t had an accident!

According to David Powell, from Lloyds Market Association (LMA), which submitted evidence to the committee, the difficulty is clamping down on fraudulent cases without harming those with legitimate claims.

But the argument that personal injury claims were responsible for pushing up car insurance costs was rebuked by a representative from the Association of Personal Injury Lawyers (APIL), who said that tougher restrictions would deny people their access to justice.

APIL say that the legal spend remains at 30 per cent of the cost of a claim, on average, and has remained static for much of the last decade and that the cost of claims has not increased but the number of claims has. As a result, insurers' costs have been pushed up by at least 30 per cent a year.

Transport minister, Mike Penning said the culture needs correcting: “The sheer culture we have in the UK that we seem to have inherited from America, is frightening.

"We are going to be in a situation like in America if we are not careful, where you get lawyers turning up at road traffic accidents."

Road safety

With the number of car insurance claims soaring, the discussion fell on  the issue of road safety and driver training.

Witnesses agreed that re-educating drivers was at the heart of the solution to keep accidents down, therefore reducing claims and, in turn, lowering motor insurance premiums across the board.

Penning said it was wrong that new drivers were let loose on the UK’s roads with no motorway experience and Tony Baker, director general of the Credit Hire Organisation, said that in order to manage prices the industry had to get to grips with risk first.

This was also something Confused.com heavily supported at the last meeting when we made calls for the government to step in and legislate where possible, in order to reduce the risks posed by inexperienced drivers.

Ambulance chasers

The committee was keen to hear how claims management companies could be affecting insurance costs and heard evidence from Laurence Beck, managing director of Accident Advice Helpline. Firms like this contact you when you’ve had an accident and pass your details on to a solicitor for a no-win no-fee representation deal.

This fee is then passed on to the insurer if the claimant wins.

Beck argued that the referral process was just a marketing tool to drive business and was such a small fraction of the claim cost that it wasn’t significant.

Credit Hire

The credit-hire industry was also scrutinised for their part in escalating claims costs for insurers.

Credit hire firms offer replacement vehicles to motorists whose vehicles have been damaged in an accident. The cost of this vehicle is then passed on to the other party’s insurer. The LMA explained that this creates significantly inflated costs for insurers, and can add as much as £600 on to the cost of a claims case.

Price-comparison sites

The sharp rise in car insurance prices over recent months was blamed on the insurance market “correcting” itself after a period of artificially low prices but price-comparison websites also came under fire.  They were blamed for introducing too much competition into an already fiercely competitive market.

The committee also heard how those customers who renewed their policy every year with the same insurer are the most profitable customers for the provider. But these profitable customers, who haven’t moved or shopped around in the past, are now moving because price-comparison sites are offering them much cheaper alternatives.

Access to DVLA records

During the hearing Penning revealed that the government was looking at giving insurers greater access to motorists’ driving records so they could accurately assess  driver’s points and convictions before they insure them.

This is a move to stamp out fraud, both intentional and unintentional. So whether it’s a driver deliberately concealing points on an insurance policy, or a driver who forgets to declare them, both invalidate policies and add to the uninsured driver problem.

The solution, which could roll out within six months, will allow insurers access to DVLA information that will automatically notify them of any penalty points or convictions. Drivers can opt out but this will obviously greatly reduce their chances of getting insured.

When questioned on tougher penalties for uninsured drivers Penning argued that car crashing was a bigger deterrent.

So that’s the debate summed up, now tell us what you think.

If you want to read more see how fraud is hitting the cost of insurance and read more on the big car insurance debate.

Let us know your thoughts and stories by commenting below or emailing them to lois.avery@confused.com.

Comments

[antony pickles]

49 yr old focus driver paying 140 quid more than last year with max no claims not a happy person .

[Simon]

"When questioned on tougher penalties for uninsured drivers Penning argued that car crashing was a bigger deterrent."
I think the article ment to say "car CRUSHING", unless the police are forcing people to crash there uninsured car, not such a bad idea actually. I've never had a insurance claim in 20 years of driving and I'm getting quotes back of around 1000 for Peugot 406, TPFT, that because I live in tottenham. To be honest the people round here I wouldn't want to insure eaither, but 20 years claim free has got to account for something. ( I would insure myself !! ).
Continus insurance just like continus TAX is unfair and penalizes the guy like me who does not drive his campervan for 6 months of the year. The who drive uninsured wont give a damm anyway.

[Yaseen]

My insurance has risen £300.00 more than last year, for no reason other than 'the under writers'...

[theresa]

well i think there will be a lot more cars on the road with out insurance some think needs to be done

[arthur.joseph]

My Ssangyong Musso cost £254 inc breakdown recovery in 2008. In 2009 it went up to £354! Even with 9 years plus no-claims. My quote in Dec 2010 was £1295! When I asked why they said "insurance has gone up" I pointed out that we have 3% inflation, not 300%. Is that really true?

[Ayub]

U need to hav insurance by law dats the problem. And insurance companies are taking advantage of this. I say if u got a really expensive car than you shud insure it and if u got a banger than you should not insure it.

Or the car insurance should b set just like road tax! No more thn £250 per year!!

The car should be insured and any driver should be able to drive it with the owners permission. This is so radicilous that you live in the same house and you can not drive ur friends or brothers car.

It shud b like this if I got a car which has an insurance group of 15 thn I shud b insure to drive any other car that has a lower insurance group thn my car. Isn't that sounds good and fair??

[dean]

Well dissatisfied... 700... last year... 1500 this year... something needs to give. Not right to penalize people for other peoples stupidity.. they should make it a set price like road tax.. depending on the car determines how much....

[Mark]

put a couple of pence on the price of a litre of fuel (to cover insurance)that way everyone is covered, if you drive more you pay more, foreign drivers on holiday are covered - insurance injury claims should not payout cash - they should provide private medical care to help injured drivers/passengers - (No financial gain)

[Mr. W.T G. Hodgson]

Dear Sirs, I am 88 years old now and have been driving since I was 18 with only one claim in that time. I have always taken out car insurance over that period and consider myself a safe and law abiding motorist but I strongly dissagree that I should be made to pay for those who think they can flout the law by driving with no insurance,why on earth should I be pursicuted for the likes of them, I think it is totally unfair and this practice should be stopped at once.

[amalteser]

Surely insurance premiums are based on the 'individuals' driving history and claims record!
Those that drive uninsured and have an accident, should be sued personally for the costs!
And tougher legal penalties for them too!
Why can't insurance companies have a low base level of insurance, which increases dramatically after the first and all other claims?
And the idea that payouts in other areas of insurance, should be clawed back through a general increase in premiums, must be unjust!

[Dan]

Hi Mark,
I like the concept, as it means that everyone pays, but some quick math shows a problem.
Assume an average 10K miles, 40MPG and 1K current premium. This works out at 89p per litre to cover insurance - Not just a couple of pence!! I would rather keep my no claims discount thankyou.

[Driven Crazy]

My insurance was £650 last year and quoted £1680 by the same insurance company this year.

It wasn't a price comparison site that made me leave. It was lack of reductions for good driving and company loyalty.

[Simon]

The problem is that the law for driving without insurance is too lenient. It should be a criminal offence and not a motoring one. If you flout the law, then you get a criminal record and the possibility of a custodial sentence.

I have been the victim of being hit by an uninsured driver and had unbelievable hassle in trying to recover my losses. I still lost out in the end.

[phil]

lets just not forget insurance costs go up every year, mine has never gone down ,but now they got another excuse and they even call a meeting to discuss it over tea and biscuits,the boffins in this country seem to think the car driver has an endless supply of money to fuel up, tax,insure and cover extortionate garage bills i can see why some people dont insure or tax the car i dont like it cus i pay for it, but what else can you expect in rip off britain.

[tom]

My insurance rose by almost £1500 from £700 to almost £2300.
Admittedly that was on a big, fancy executive car.
In the end I had to sell my car, as I was unable to afford the cost of insuring it. I now have a cheaper car, but my premium is still £900 a year!!
If uninsured drivers are the problem, then make the fine a criminal one, and also double that of the average insurance quote for that individual. Eg; £1000 for a £500 premium.
If the criminal can't afford to pay it back, then take £1 a week out of their wage via paye or out of their benefits.
1000000 drivers, if caught would be paying £1000000 a week back in fines.
Simples.

[Harry]

Driving without insurance - 6 points £200 fine. Insurance - £600+ . . .

If the government is serious in resolving this, then they need to thow similar resources to it as are thrown at TV licence detection. The DVLA has a database of "active" registrations. If the car is exported or scrapped, the DVLA are notified. If it is no longer in use, there is SORN. The insurance industry has a database of insured vehicles. How hard to match the two and visit people at home (rather than setting up on road checks)?

To make it easier, change the law to all cars needing basic insurance (then driver based insurance can be used to "top up" basic to comprehensive). Easier to police, easier to convict uninsured drivers, net result cheaper insurance for all.

[Lellith]

I think that UK is a joke in everything they do. People can do as they wish and claim what they wish and the people who work and pay Tax, National Insurance and live according to the law gets penalised. They have to pick up the tabs for people who think that UK is a soft touch and crime pays. Prisons are a joke, whereby criminals do not mind going to Prison in the UK because it is luxury. People are leaving from all over to come to the UK to claim benefits on lies. They reap what they did not sow and the people who sow gets nothing for all the years they have been sowing into UK. I am not surprised about the economy and everything going up, no jobs, overloaded social services and lack of houses. People can start businesses in UK on lies and get loans from the banks. BUT why do the hard working, honest people have to foot the bill for dishonest greedy people. People are wilfully crashing their cars and claiming for it. Other people are being killed by non-insurers who slip through the net. The car insurance did not just go up it tripled in a year.

[Kammy Beattie]

Create a proper deterrent for those who don't pay not a deterrent to actually pay! A price hike to this scale will only make the situation worse - Why should I pay such ridiculous 'robbing' costs on top of all the other rises in vehicle costs I have to endure?!
If the authorities aren't going to do much about me not paying and infact just charge my costs to the idiots that do, then maybe I'm tired of being one of those idiots!!

I have maximum no claims, never had any problems on the roads yet my premium keeps rising - there is no logic! What is a no claims bonus anyway?! In my nine years worth Iv'e yet to figure it out!

Insurance companies are practicing legal fraud! How can anyone get away with charging £1000 annual premium to put my details on computer then I never hear from them again in a year until they send me a letter telling me my premium is to go up?!

I should start an insurance company, Ill award any driver who doesn't make a claim or contact me in the 12 months a 25% rebate if they stay with me for another year. I will also match or beat the previous years premium for those who don't make a claim with the incentive they will rebate another 25% of this years if they don't claim. so on and so forth. < This is fair - but also to the financially raped british driver just a dream!

[Dixon]

I have always said that there is too much publicity for no win, no fee claims for personal injury. People are being encouraged to make claims, because they know it won't cost them anything to find out if they've got a good claim. It's too easy to make a bogus claim. The publicity should be curtailed, and insurance companies should contest claims.

[emr8097]

Have Compulsory 3rd party insurance included in the road tax like they do in parts of Australia, which reduces the cost of personal injury claims on the insurance companies. Those who want to add Comprehensive cover have the option to do so at a competitive rate.

My husband and I have had no 'own fault' claims and our current provider is trying to increase our insurance by £700. They even admitted my premium has increased because of a claim for a truck hitting my parked car last year, even though the costs were fully recovered from the truck driver's insurance company. Though apparently this was quite a small portion and it was mostly just 'industry increases across the board'. What a bunch of con artists. The government needs to do something about this as soon as possible.

[Simon Holmes]

I was astounded with my renewal quote this time round. Last year fully comp £460. This year £768!!! I've 10 years ncd (no claims discount),which is protected.The worst quote I was given was.....£3000,and I will name the company...it was More Than,which I now believe to stand for more than anyone else,pure attempted robbery!! TAKE NOTE; insurance companies,if you come across drivers,perhaps like myself who comply with the law and drive reasonably responsibly,do NOT punish them for their good record of driving.Where I live my postcode is considered to be the worst in the city for insuring anything,this is not my fault,it is tied in with many other factors,like good policing,watchfull neighbours,and the reporting of suspected crime,whatever the form may be,I feel if people started to act together to combat all criminal activity this may well lead to better lives all round,no doubt including a reflective reduction in insurance premiums which at their present levels are unacceptable. Rant over,cup of coffee now aaahhh.

[W.E. Rimington]

Nothing of any substance will be done unless honest, penalised drivers do a 'poll tax' and cause massive civil trouble. Only then will that futile, useless, disinterested acqusitive, self-interested mob who call themselves our elected representatives get off their fat backsides.
It's like the 0845 phone number scam which no-one will do anything about despite the fact that it is legalised extortion. Just work out what you pay on the 0845 number racket in a year and you might get a surprise.
Uninsured drivers are blatant criminals. Their assets - whatever they are - should be stripped from them and that includes their house, car, Hi-Fi and underpants.
However that would offend their civil liberties wouldn' it!!!!!!!!!!

Ted

[colin walker]

When I came to reinsure my car with my insurance provider I told them that at the time I was unemployed (previously I was in employment). As soon as I mentioned this I was told that I would have to pay an extra £50. They gave the reason that as I was unemployed I had more time to drive the car. I countered by saying that as I was unemployed I had less money for fuel ad would drive less. On top of that I was informed that when I get back to work I would have to inform them as they may need to make further adjustments. Surely when you take out car insurance you state how many miles you will do a year and providing you are within that limit what difference does it make if you are driving to work,or to the shop or to see Aunt Fanny. The insurance companies are just exceptionally greedy people looking for any way to extract more money from the hard pressed motorist.
Its about time these people used some common sense.

[Mark]

Well I think a word from the younger drivers is needed here. I personally have never driven without insurance, and have 3 years no claims (the entirety of my driving career) and my insurance continues to spiral out of control, I've already downsized my vehicle once. It's a lot easier when you're 50, have a few grand in the bank and savings for that once a year cost bomb and get angry about it, it's not so easy when you're 21, have no savings left, require your vehicle to get to work. A fair few of my friends do drive without insurance, 6 points and £200 IF they ever get caught, or £2,600 a year or more?! They can't get to work or university without their vehicles, raising costs simply makes more people drive uninsured, its about as a counter-productive as you can get.

[GEORGE DILLON]

When my daughter dented her car recently due to ice on the road she asked the garage for a quote and told them she would pay for the repairs herself. She was quoted £790. However as this was more than she could afford coming up to Christmas she decided to put the costs through her insurance company. The cost of repairs suddenly rose to a massive £1970.It seems garages can charge what they like once they see an insurance repair. So much for the assesssors.