With the recent stormy weather causing significant damage to vehicles and homes across the country, combined with an increase in car accident claims, insurance companies are bracing themselves for another bad year – and that means higher insurance rates for you.
I spoke to Darren from www.bigmotoringworld.co.uk who said “car insurance has been on the increase steadily since 2015 and it doesn’t look like 2018 will be any different, unfortunately for the average motorist”.
And the price hike is nothing to do with how well you drive or how many no claims you might have. It’s a matter of the insurance company’s profit.
How do car insurance companies make money?
Like all businesses, insurance companies need to make money to survive and they make their money from the premiums which we pay them. However, if they start to pay out more in insurance claims and regular costs, then they start to lose out.
If the ratio of damage pay outs to premiums coming in goes above 100%, it means the insurers are making a loss and that’s when we, the customers, end up having to pay a higher premium to keep them back in balance.
Bearing in mind many of the insurers are huge global corporates, the recent hurricane and storm devastation has seen a huge hike in claims paid out over the past years, along with an increase in drivers on the road meaning more accident claims than ever are also being paid out.
Which insurance companies are affected?
This combination has seen an overwhelming number of the car insurance companies – 8 of the top 10 – experience ratios higher than 100% in the past few years.
So even if you have never had an accident in your life, the likelihood is that your car insurance payments will increase this year. It does always pay to shop around to try to get a better deal and it’s always worth checking out the insurance comparison sites to see what’s available, but with most of the big companies in the same boat there are less likely to be great deals out there.
Unfortunately, despite the rates having risen regularly over the past few years, it still doesn’t seem to be stemming the gap between loss and profit for the companies either. Current trend analysis shows the top companies are still likely to make even more of a loss, even with an increase in premiums paid this year.
What has led to this situation?
This has been blamed on the increase in large claims due to storm damage and also comprehensive claims which can be very costly for insurers. But also people seem to be crashing their cars more over the past few years, perhaps distracted by mobile phones and social media – with more claims than ever before coming in from road accidents.
According to statistics, 22% of households had made a car insurance claim, compared with 20% in 2010. More and more of us it seems are having car accidents and claiming on the insurance than compared with a decade ago.
Unfortunately the combination of weather damage and increased accident claims has continued unabated for several years, causing the car insurance companies to continually move towards bigger and bigger losses, despite putting up premiums on an annual basis.
Where is the insurance market likely to go from here?
It is difficult to predict where car insurance prices might go in the future as the trends including distracted drivers and more drivers on the road are only likely to increase, while clearly the weather patterns are completely unpredictable by nature.
It maybe that future changes to laws around driving while distracted, or some other changes in policy might help to put people off driving and then help to drive down premiums again but that really remains to be seen.
Right now, all that we can be sure of is that our premiums for 2018 are likely to increase yet again with many people paying around 20% more compared with 2010 prices when the companies were in a far better profit position.
It is a good time to try to shop around to make sure you are getting the best deal and best value for money for your car insurance but there are unlikely to be ground-breaking offers out there. It might be a good time to check out some of the smaller less popular insurers who are not so affected by the large claims to see if there is any room for manoeuvre there.
So, unfortunately, no matter how good your driving history or how clean your license might be, it seems there is no escape from an inevitable price hike in your car insurance premiums for this next year, thanks to the weather and an increasing number of distracted drivers on the road out there.