It’s difficult to fathom how car insurance costs are calculated? It may be that a number is drawn from a hat and that’s the increase or it may be calculated by much smarter people than injury lawyers using complicated algorithms – it’s difficult to say. One thing that is easy to say is that the people setting these figures have little grasp of reality.
In 2016 car insurance premiums rose by 14% and no one has managed to find an insurer capable of explaining why. One insurer stretched credibility to the max with the claim that cars, as they get smarter, cost more to fix. This theory can immediately be debunked for two reasons.
Firstly, labour rates for both fault and non-fault repairs haven’t increased for years. Secondly, the number of reported accidents and claims arising from these has continually fallen. In fact, data from the Association of British Insurers (ABI) shows that the 14% increase came off the back of a decrease in personal injury claim costs to £5.8bn in 2015. How can insurers hike up premiums when their own research shows they are paying out less? We’re still waiting for an answer to that.
A peek at insurers margins shows profits are healthy though. In February 2017 AXA announced a 12% increase in profit to £263m and RSA’s profit rose by a staggering £112m to £259m. It does not take a detective to work out where the extra cash drivers are forking out appears to be going.
At the same time these healthy profits were announced, many insurers reiterated (without making a cast-iron guarantee) that people in England and Wales would save £40 a year following the Ministry of Justice’s appalling decision to all but remove the right to claim for personal injury and receive legal representation south of the border.
Within a matter of days this was reneged upon when long overdue changes to the discount rate for personal injury claimants were announced. Insurers have now warned this will add anything from £75 to an astonishing £1000 to the average premium, depending on your source. It is farcical that insurers can play fast and loose with people’s premiums in such a manner.
When all is said and done it is simple. Insurers – and no one else – can control whether premiums go up or down and personal injury claimants, looking for compensation they deserve and need, will continue to be an inconvenience and afterthought. As long as insurers prioritise shareholders above customers the only way is up for premiums.