Why is car insurance so expensive?
One of the biggest costs faced by car owners is insurance. Covering your car for an accident or range of other eventualities can be expensive. To find out more about the cost of car insurance and why it can be so expensive, keep reading.
The cost of claims
Car insurers calculate their prices according to the number of claims made and how much these claims cost. There are multiple factors affecting both the number of claims made and the cost of them.
Technology
Advances in technology have led to a rise in keyless car crime, as well as more costly repair bills.
Fraud
Fraudulent claims cost the industry dearly. According to the Association of British Insurers, £1.3 billion worth of fraudulent claims were discovered in 2016. To put this another way, each week around £25 million worth of fraudulent claims are made. Even when these are detected, the costs of stopping such claims still adds to insurance premiums.
Whiplash
Whiplash is a very difficult one to deal with, as this kind of injury cannot be seen on X-rays or scans. This type of claim is therefore open to abuse, and the number of claims has been rising steeply for over a decade. Measures to limit this are being considered by the government, but to date nothing has been brought into force.
Uninsured drivers
Motorists driving illegally without insurance don’t pay a penny in premiums, so it’s left to other motorists to pick up the bill. The Motor Insurer’s Bureau estimates that there were more than a million uninsured drivers in the UK in 2017, despite the threat of prosecution and a hefty fine. All car owners must, by law, have insurance unless their vehicle is kept off road and declared to the DVLA via a SORN (via a Statutory Off Road Notification), yet this problem persists.
Gender
A European Court of Justice ruling means that insurers are no longer able to offer a discount to drivers on the basis of gender. Other factors, such as the power of the car and the mileage travelled, can help to make insurance cheaper, but gender itself cannot be used to determine the premium.
Age
Younger drivers are statistically more likely to make claims on car insurance, therefore their premiums are higher. The fact that they have not had a chance to build up any no claims discount also comes into play. Black box or telematics insurance can be a good option for young motorists, as it takes into account how careful a driver the person is. The technology can be installed in the car or via a smartphone app. The driver as well as the insurer can track their driving track record, and therefore see where they can make improvements if necessary.
Occupation
Statistically, some jobs are more risky than others, and insurance premiums reflect this. A night club worker may be, statistically speaking, a higher risk than a nurse, so they will fork out a higher sum for insurance to cover this increased risk.
Postcode
Some postcodes are claims hotspots, while others are considered low risk. If crime statistics indicate a higher risk of vandalism or theft, this can raise insurance premiums. Inner city areas in particular are often more pricey due to higher rates of crime.
Insurance group
All cars sold in the UK are placed into one of 50 insurance groups. This placing is determined by the projected cost of a claim, parts and repair prices, the value of the car, how powerful it is and its safety features. Modifications to the vehicle can also add to the insurance cost.
