Car Insurance
The latest rise in car insurance premiums wll have added over £50 to the typical Shoparound premium – this Shoparound index is an average of the cheapest three quotes from around 20 insurance companies, brokers and schemes for each of a basket of risks representative of the UK population.
Over the course of 2010 the Shoparound premium rose £210, bad news for the motorist when taken on top of the fuel duty and VAT increases in January, as well as a 1% increase in Insurance Premium Tax (IPT).
Simon Douglas, director of AA Insurance, says: “There has been no let-up in premium increases as insurers struggle against losses from 2009, when for every £100 taken in premiums, £123 was being paid out in claims.
This has led to the biggest annual premium increases we have seen since the AA Index began in 1994. The sharp rises recorded by the Index prompted a House of Commons Transport Committee inquiry into the car insurance market.”
According to the Association of British Insurers, there are 108 fraudulent motor insurance claims amounting to a combined value of £1.12million, detected every day which Mr Douglas believes is ‘just the tip of the iceberg’. He adds that some estimates put the cost of fraud at £80 for every honestly bought car insurance policy.
Mr Douglas points out that some insurers have taken cost control to the extreme, by exiting the car insurance market altogether while others are becoming increasingly choosy in the risks they underwrite.
“For example, more than half of insurers will no longer insure young drivers and many are also withdrawing TPFT cover. As a result, premiums for them have risen to a point where they are becoming unsustainable.
“Although young male drivers are ten times more likely to have a car crash than older drivers, it is nevertheless important that the industry finds ways to help young people start their driving career safely, responsibly and affordably.”
As Lee Griffin, business development director of Gocompare.com comments “”Looking at the findings of the latest AA insurance index two things stand out. The first is that all drivers, no matter how long they’ve been with their insurer, absolutely have to shop around when they get their renewal notice. And secondly, easily the best way of shopping around is by using a comparison site.
The AA’s figures show that comparison sites consistently find lower quotes for drivers for both comprehensive and third party insurance. The AA’s normal shoparound average premium for comprehensive insurance is £224.10 higher than the shoparound average premium found on comparison sites.
Comparison sites have shown the lowest increase in the cost of comprehensive insurance and actually a small drop in the cost of third party insurance.
Drivers should not accept eye watering increases to their premiums when other insurers are so keen to compete for their business.”
Home Insurance
For home insurance, insurers are becoming increasingly concerned over weather related claims and as a result are increasing premiums sharply. The Shoparound average premium for buildings over rose nearly 8% in the last quarter.
Simon Douglas said that “Flood claims are both increasing in number and unpredictability. In just the past quarter we have seen severe weather in Cornwall, Hampshire, Sussex, the Isle of Wight and elsewhere, in places where there is no flooding history.
In addition, the early winter brought a huge increase of snow and ice related claims for the second year running – in fact the Association of British Insurers estimates that the industry is paying out £7m per day for burst pipe claims.”
The worry is that many homes are under insurerd, meaning that should a major claim be made, insurers may only pay a percentage of the claim, comparable to the amount of under insurance.
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