In early 2018 the Association of British Insurers (ABI) released statistics highlighting that the value of automobile insurance now accounts for 10% of a young driver’s average salary. But what are the explanations for the rising costs of car insurance?
Companies state that they are always doing their best to keep prices competitive and frequently review how they price their policies to offer the simplest and best value for the cover they provide.
There are a number of the possible explanations why car insurance costs across the industry are on the up, even for loyal customers and people with no claims history:
Insurance Premium Tax (IPT)
Introduced in 1994 by the UK government, IPT applies to all or any general insurance premiums and has steadily increased over the years.
IPT jumped from 10% to 12% in June 2017 and significantly impacts the worth you buy your automobile insurance. it’s applied after the premium has been calculated by the insurer, so unfortunately it impacts customers paying higher premiums even more.
Claims and therefore the cost of car parts
Claims are getting more costly for insurers for a variety of reasons:
Since the Brexit referendum in June 2016, the reduced value of the pound meant car parts are now more expensive to import as they’re often manufactured abroad, meaning costs are priced at euro rates.
The cost to repair technologically-advanced cars has also been impacted. Replacing modern car parts after an accident isn’t as simple because it once was. Whether it’s bumpers with parking sensors or windscreens with rain sensors, these can significantly push up repair costs.
Dishonesty and whiplash
Uninsured drivers add around £30 to the value of your insurance annually. additionally, whiplash claims still be a big contributor to claims costs.
The ‘Ogden effect’
The Ogden discount rate may be a calculation that computes what proportion money insurance companies have to pay to people who have suffered life-changing injuries. The intention of this pay-out is to hide the claimant’s future loss of earnings, also as any care costs.
In March 2017 the Ministry of Justice reduced the discount rate by 0.75% meaning that since then, insurers will incur significant additional costs in settling motor claims.
General inflation means the value of your automobile insurance rises alongside other costs.
What affects your initial automobile insurance price?
Your age and driving experience
As you grow old and you’ve held your driver’s license for extended, you’re considered to be experienced on the roads because statistically you’re less likely to be involved in an accident..
Younger drivers, aged between 17 and 25, typically face paying the very best premiums. All isn’t lost; if you’ve got a careful young driver in your family then quite SMART WHEELS telematics recorder insurance could be just the ticket!
There’s also some extent at which your age is seen to be a better risk because the prospect of you being involved in an accident increases in later life.
Some jobs mean that you simply spend longer driving your car for business use otherwise, you use it to commute to figure during the week. It’s important you decide on the proper level of cover and you provide an accurate estimated annual mileage. The mileage you drive per annum may be a key factor in determining your premium, because of this links into the likelihood of creating a claim.
Two similar job titles can provide two very different prices so it’s important to be as accurate as you’ll when entering your job title.
Where you reside
If you reside in a built-up area where the danger of accidents is usually greater, then you’ll pay more for your automobile insurance especially if there is a well-known accident blackspot or dangerous road junction in your town, otherwise, you may live near a road with high levels of car crime.
It can vary between nearby postcodes. A car owner who lives on a busy highway may need to pay higher prices because more accidents are reported there.
Your claims history
If you’ve made a claim within the last five years or have any points on your licence, this may have an impression on the worth quoted. you’ll economize on your automobile insurance if you’ve not made a claim within the last 5 years because for each year you drive without making a claim on your automobile insurance your insurer will offer you one year’s no claims bonus (NCB) which will offer you a reduction on the value of canopy at renewal.
These discounts are accumulated annually – the more years you drive without making a claim, the greater the reduction within the cost of your automobile insurance. you’ll also prefer to protect your NCB, so it’s less impacted if you are doing got to make a claim.
A little runabout isn’t only cheaper to run but also cheaper to insure for many people. a bigger engine or newer car is usually costlier to repair. they’re also more attractive to car thieves so you’ll expect to pay more to insure it.
Alarms, immobilizer, and other inbuilt security devices may help reduce your premium. the worth of your insurance also can vary counting on the security features of your vehicle.
The type of canopy
You’d think that the upper the extent of canopy you choose, the more you’ll pay but this isn’t always the case. It’s worth checking the worth you’ll buy each level of the canopy on offer also as ensuring the one you decide on meets your needs.
Increase your excess
You can reduce your premium by increasing the voluntary excess to an amount you’re ready to pay on top of the compulsory excess if you would like to form a claim.
It’s also important to recollect that your policy doesn’t just provide protect your car – it’s also there to guard other road users against accidents you would possibly cause.
Previous new business discounts
Another reason why your renewal can increase within the first year could also be because the insurer has given you a one-off new business discounts or cashback offers the previous year, that won’t be included within the renewal price.
However many insurers, including quite, give existing customers loyalty discounts as an incentive to shop for other products so it’s always worth checking what’s on offer.
Make changes to your policy online
Did you recognize you’ll log into your login to your account to form the subsequent changes to your policy without incurring an administration fee?
- Change of car
- Change of address
- Change of driver
Plus you can view and download your policy documents including your motor certificate whenever you need to.