Car Insurance - Why it's time to take a stand.

There are certain rites of passage as we grow into adulthood - things we undergo and accept as being natural as our bodies and mind change and develop. For some of us, our voices grow deeper. We grow hair where there was no hair before. But one thing we all have in common is that we pay higher car insurance because everyone tells us we’re more dangerous on the road statistically-speaking than anyone else. As a youngster with no relative experience, we accept this as truth and move on in the hope that one day we will reach 25 - the fabled and magical age at which we apparently become responsible and our premiums drop to a more normal level.

For ten years I have paid anywhere from 10-25% of my annual income on car insurance. I have willingly put money into a pot firm in the belief that it is for my own good, as well as being a legal requirement in the UK. I’ve seen headlines come and go and been outraged at the various reasons we’re told our insurance premiums are going up. Collectively, we’ve laid the blame at young people, old people, men, women, fraudsters exploiting false injury claims and even immigrants in a series of profiling campaigns that are frankly unacceptable in any other industry. We’ve accepted the rise upon rise of premiums as necessary and normal, safe in the knowledge that we’re storing away for our own safe-keeping.

In July this year, I was unfortunate enough to be involved in a collision and I found that I needed to dip into the pot in which I have paid thousands over the years in incident-free driving. My experience in doing-so has highlighted some glaring inaccuracies in what we’re told and the laws and legislation that allow these companies to work relatively unchecked.

Firstly, just to make one thing absolutely clear - the only people at the cause of your insurance premiums going up are the insurers themselves. We’re told that premiums go up based on trends identified in their statistical data. So let’s take a look at where insurance companies get their statistical data from - the ‘central database’. Information on the specifics of this database are predictably obscure and vague, with few google hits referencing anything directly. In fact I only found one direct quote which essentially said that the system is so complex that even they can’t explain it, such is the sheer amount of data held within it. This ambiguity allows insurers to essentially attach any statistical trend to our premiums without really giving them any context or evidence. In real-world terms, what this has allowed insurers to do is to raise premiums regardless, giving us a different reason each time.

Let’s talk specific examples - the ones that hit us in the wallet every year. We’ll start with the common misconception that false injury claims are responsible for the hike in the premiums we pay. Following my incident in July, I was forwarded by my insurance directly to a contracted solicitor. Within an hour of reporting the incident, I had seven different phone calls from people requesting that they be the ones who pursue my injury claim. Most notably, that included the insurer of the third party. Even as I write this in October, there isn’t a day in the week where I don’t get canvassed by someone offering to pursue my claim. ‘But why?’ I hear you cry. Well, it’s simple and it’s made even simpler on a clear-cut incident like mine where the outcome is obvious. As many solicitors do, they work on a ‘no win, no fee’ basis. When they know they’re going to win, they know their own costs will be covered and they will get 25% of any settlement fee as a bonus. The industry revolves around people pursuing injury claims, false or otherwise - the insurers are engineering their own increase in premiums.

So now let’s take a look at how my life as an average Joe has been affected since. Well, I was only given roughly half of the agreed value of my car (which was insured on a fully-comp policy with all mods declared and covered). This meant I was not able to buy another similar car, so now instead of driving a modified, track-ready Mazda MX5, I drive a completely standard Suzuki Ignis. Not exactly ‘like for like’. Insurers agree upon themselves the value of your vehicle, so are under no obligation to honour the value you both agreed when you took the policy out. You can ask for an ‘independent engineer’ (who oddly enough are requested by the insurer) but their opinion is final.

The main thing, however, is that my own premiums have now increased by 50% even though I wasn’t at fault. This is where it gets important.

If we go back to the central database and its impossibly complex algorithms that are far too complicated for us mere mortals to understand - their statistics show that anyone with a non-fault claim is more likely to have an at-fault claim in the following five years. They argue that to support this data, there are several flimsy reasons they can attach to this belief that you and me are forced to buy into, such as the roads you use or the way you drive (which surely are behind any claims?). If you consider that on average, a ‘full’ no-claims bonus entitlement (‘NCB’ of five years) discounts around 60% of a premium, then of course by then increasing it by 50% following a non-fault claim, your NCB is essentially in name only. Doesn’t sound legal does it?

So who regulates the insurers to stop scams like this? The Financial Services Authority (FSA) of course, who put out a disclaimer stating that they have no influence over commercial business decisions (such as how much to charge), they can only intervene if people are being discriminated or unfairly treated - something car insurers build their business on!

I took the liberty of pulling some publically-available statistical data this morning from 2013-14 Police records in my local area which would hopefully explain why my house insurance is five-times cheaper than my car insurance despite a financial value difference of £112’000. Rather predictably I found that house-crime was four times as prevalent as car-accidents and significantly more common than vehicle-crime, so there’s absolutely no logic or reason as to why my car insurance premiums are so high. Well, apart from one reason. House insurance isn’t mandatory in the UK. Car insurance is.

Car insurance is a racket. It’s time we put an end to it.