The AA estimates that for every 100 received, insurers are paying out 105 in claims, which represents a five percent shortfall. The Association of British Insurers (ABI) puts the total motor insurance net premiums for 2007 (written premiums less re-insurance premiums) at 10.5 billion, making that five per cent more significant.
So that is reason premiums cost so much and are likely to increase, right?
Recently we looked at how fraudulent claims are estimated to cost every car insurance policyholder 30-50 (depending on who you ask). If you then add on another 30 – the reported cost to each policyholder for damage caused by uninsured drivers – the figure quickly starts to add up. And if you add a further 66 pounds to cover the cost of whiplash victims’ claims (something we’ve covered before), plus another 20 to cover the cost of spurious legal fees and extortionate replacement car hire prices you’re looking at 146 or more in total.
In theory, that’s almost 150 of your insurance premium that you shouldn’t have to pay.
And it seems more likely that abuse of the insurance system will only grow in the current economic climate. Personal injury claims and subsequent legal fees rose 22% in 2008 to 6.16 billion and the AA fully expects this to rise to 10.9 billion by 2012. This would mean an average of nearly 200 being applied to the cost of your insurance. Imagine what a dent this would put into the average comprehensive premium, which currently stands at 724.28.
Why are insurers and agencies putting up with honest policyholders shouldering the burden for criminals? Let’s be honest, insurance fraud is costing you more than any mugging probably would so why call it anything less than a crime?
Whilst it’s inexcusable to drive uninsured, it’s easy to see why many young drivers are prepared to take the risk. The Insurance Daily recently reported on the rising cost of insurance, quoting a 17-year-old male in the city of Cambridge driving a Ford Focus CL 1.4-litre five door at a staggering 3,642, while a similar quote for a female of the same age came out at 1,810. In comparison, identical cover for a 21-year-old male and female was quoted at 565 and 333 respectively.
When the fine for driving uninsured will only be around 200, you can see why it’s seems like a viable alternative to younger drivers.
In insurers’ defence however, 29% (75,000) of road deaths and serious injuries are caused by drivers under 25, with young males responsible for 63.4% (47,000). In light of these figures, you can understand why insurers load premiums for men under 21. Statistically they are ten times more likely to have an accident than men aged 35 and the average claim for a young male driver is just under 4,500, whereas it is only 1,400 for men over 30.
So, the uninsured driver risk is unlikely to come down. What about whiplash claims?
The current economic downturn and rising unemployment may lead to even the most honest of drivers being tempted to claim for whiplash in the event of an accident, with the integrity and marketing methods of “no win no fee” solicitors being called into question long before now.
Chances are, solicitors are unlikely to lower their fees any time sooner either so we are stuck with paying 150+ each for insurer’s to put it into the pockets of the less scrupulous of our fellow countrymen.
The only thing that can reverse this trend is for courts to take stronger action on individuals breaking the law. But like we’ve reported many times here, the British court system couldn’t be more soft on insurance fraud criminals with most getting suspended sentences (i.e. let off) or fines that don’t match even a tenth of what they stole.