The world of insurance premiums is a strange one, especially it seems motor insurance.
Premiums are based on lots of things, and take account of lots of different risks.
But taking away the obvious ones like parking at night on the street, the younger age of driver or living in a city or high crime area, the next most obvious effect on the size of the premium is claims experience/driver experience.
At the end of the day, an insurance company is a business trying to make a profit.
It has to cover claims made against its customers.
So year on year it casts ahead and tries to build a reserve for monies that might be paid out in the future for claims against its customers.
So risks matter, as the more risky the customers, the more money it might pay out.
That seems obvious but recently a lot of factors seem to be used by insurance companies that are on the face of it just plain unfair.
For example, all insurers consider your traffic convictions to assess how risky a driver you are.
In the past some have taken the view that most of us will suffer a ‘low speed’ speeding ticket because of the way that speeding offences are now reported and enforced and as a result one speeding ticket will not count towards a ‘higher risk’ needing higher premiums.
Some take this further.
If you have a speeding ticket with a low ‘excess speed’ you can take a speed awareness course. This is meant not to punish but educate the low risk offender. Most insurers state that as it is not a ‘conviction’ they don’t consider it affects the premium.
However some do and will either load your premium, or even worse, void your policy if you don’t report it as a ‘conviction’ on renewal.
A void insurance policy is a disaster as not only would it mean a loss to you if something happens, but getting insurance after having a void policy would be extremely difficult and/or expensive.
So take care when completing your insurance proposal and read the questions carefully, especially if you are completing them online.
An even more unusual one was reported by a contact recently.
Their Insurers had contacted him asking him to complete an accident report form as an accident had been reported by someone to them, and they claimed it was a ‘hit and run’ involving his car.
The Insurers then loaded the premium as a risky policy on renewal, even though the policy holder sent photos of the undamaged car and advised no accident had occurred.
Two issues come up here.
The policy holder might in fact have been less than honest, shown historical photos or even had repairs done before sending out the photos of the ‘undamaged car’.
Insurance companies tend to be ‘glass half empty’ people, as they see much more fraud than ever before and tend to the negative rather than positive view..
So in some ways they might be forgiven for reacting as they did.
However instead of investigating this further, they loaded the premium for the next 2 years, and only when no claim came in, and it was clear the 3rd party accident report was false and malicious and maybe the first step in an attempt at a fraudulent claim, did they renew the claims history and allow lower premiums.
However for the 2 years other premiums received, despite having no outlay, and therefore a falsely increased profit, the fault free driver was offered no redress, return or compensation for the extra profit they had received.
Is this fair?
Of course it isn’t.
What’s the Insurers point?
They were acting having received what they viewed as a proper notification of a loss that had to be met from their future reserves to be built up by increasing the premium.
Would they reflect the result of no call being made on this reserve?
No as they would say that insurance premiums are past business and they reflect the risk seen at the time calculated.
So is the innocent driver the loser at all times?
It seems that way.
However there are ways to counter this and it depends your view on how far you want your life to be intruded on.
If you are the perfect driver, then get an insurance premium tracker attached to your car.
Not only would you be able to get lower premiums because you are making that forward promise to your insurers that you obey all speed limits, it would show where you are at all times, avoiding any fraudulent claims.
Maybe think about a front and rear video system, which are becoming more and more common.
Recording your whereabouts in the car, and the accident circumstances would not only prove your innocence in a fraudulent claim, it might also assist in a claim for repairs to your vehicle or even claiming for injury if you were involved in a more serious incident.
Some people might think these are too intrusive but in a world where more people are willing to report accident circumstances to save their policy premium rather than reflect the true accident circumstances, it could also help you keep your no claims history and those lower premiums as well as providing evidence in any claim you make.