I work for an insurance company and 2009-2010 we made a loss on motor insurance despite the costs steadily going up to balance out the loss ratios. I used to quote on average a first time young male driver £1800 during the beginning of that year, it's increased now pretty quickly to around £3500, by all means the risk of all drivers hasn't changed much, infact it hasn't really changed at all.
Here's a brief breakdown from what I remember, I get staff updates on my internal mail so it mainly comes from memory!
- Everything has suffered inflation in the UK due to the economic shift and increased taxes; this has effected the premiums directly, as well as claims because what insurance pays out on has effectively been suffered by inflation too.
- Comparison websites, as much as we like to use them have caused insurance ironically to rise. An insurer has to pay to be on the comparison website to start off with, and then a further amount of commission if that customer goes with a quotation originally done on the comparison websites.
They have also formed a massively unrealistic competitive market for insurance, meaning insurers are now having to push every pound down to get to the top, effectively not making money on the customer unless they renew the following year as they wouldn't have to pay comparison websites for this.
- E-commerce insurance policies and the fact that no matter how fraudulent an policy is; in the event of a claim they cannot refuse to pay out on third-party damages, they can only attempt to gain these back afterwards via the vast expensive legal system, mainly resulting in further loss.
- Fraudulent whiplash claims where in a car, normally with 5 people in, slams the brakes on unexpectedly resulting in the driver behind to go into them. More often than not, this means all 5 people get thousands in fraudulent whiplash claims, the legal costs are paid for by the insurer too.
- Rising car crime in areas, mainly city areas.
- Rising amount of uninsured drivers. It's quite easy to get caught if a car is completely uninsured, it's mainly more risky drivers driving a car in a less risky drivers name. For example son/daughter driving parents car when they aren't insured on it. They are more likely to have an accident, and if they do despite them not technically being insured, the insurer of the car still has to pay out on third-party damages and attempt to recover them later. Of course on the flipside, increasing premiums are causing more people to resort to this to actually get on the road.
- Whiplash cannot be proved true or false, and due to 'no win no fee' accident compensation companies this massively encourages people to claim no matter the outcome as a result of an accident, you'd be stupid not to...right?
- Generally worst weather than previous recent years, and more pressure to get to work and make the money means more people are on the road during times they should take it more carefully.
Add these together and then try and make some profit.