Why are the quotes getting more and more expensive?

Auticko1

Hi, I have used different comparison sites for insurance quotes for a Ford Focus, which I haven't bought yet. I have no idea why but everytime I ask for a quote for more or less the same type of car (same mileage, registration year etc.), it keeps getting more expensive! 2 months ago, the cheapest quote was about £850 but the car got sold to somebody else. Next time, the quote (after the first one expired) was £1,000 and now it is £1,200! I am entering the same or very similar details so why has the price risen by almost £400 in a few weeks'? What am I doing wrong?

hartcjhart

I dont really know,BUT, the sceptic in me thinks,that at this time of year people are being given/trading up as it's Xmas, so the insurance co's can grab a bit more money

dunstonh

What am I doing wrong?

Nothing.

It is normal for prices to increase in a recession. Claims go up due to consumer fraud. Cross subsidising goes down because the other ways the insurers make money dont provide enough. Its possible that there are signs that first year discounting is reducing a bit as well.

Astaroth

Look at the car insurance market, at the moment the underwriters are running at 105% so for every £100 they get in they are paying out £105 (ie making a £5 loss). This has been the case for a couple of years because claims costs have been going up but premiums haven't.

When you pay your premiums the insurers invest the money and up to a year ago have been getting a reasonably good returns allowing them to overall make a profit.

Then comes a recession and you suddenly get 2 problems. 1) your income from investments goes to nothing so you can no longer subsidise low prices/ underwriting losses and 2) as dunstonh says, you suddenly get spikes in claims because people realise they can easily "lose" that expensive engagement ring and get a very useful cheque

SuperFlyGuy

Its a number of issues the main one fraud, thesedays everyone who is involved in a minor accident i.e bumper to bumper at 1 mile an hour claims for whip lash, it's a claim culture now and higher premiums are the result, Winter alway produces higher quotes as the aim of insurance is risk, it is obviously riskier to drive in winter with snow, rain, early onset of darkness. The companies try and build this in annually but if they dont have a good summer they often need to bump up prices to compensate. And finally the recession means that less cars are being baught so less insurances is being taken out, so the risk is spread amongst fewer policies, so again prices are affected.

dacouch

It's more to do with Astaroth's answer, as he rightly says the Insurers traditionally make more money from their investments than from the actual insurance where they tend to either lose money, break even or make a small profit.

As there is a recession they are making less money from their portfolios of investment, this has a double whammy of meaning they are making less money but it also means they have less capital. They have to have certain levels of liquid capital set aside to be able to meet their obligations (Claims). As their investments have reduced in value they need either more liquid capital or they simply they simply have less "Capacity". (Capacity is very simply say they have £100m of liquid capital they might be allowed to take in premiums totalling £50m). As their capacity has reduced they tend to increase the premiums and take on less clients and therefore have less risk.

The fraud risk and other factors caused by a recession do have an impact but the main reason premiums increase in a recession is the value of the investments reducing. It's why in most recessions premiums Harden (Go up) and when investment returns are good capacity increases and premium Soften (Go down). This is the classic cycle of Insurance that has been in effect form decades

Millionaire

I was going to post asking this same question. Just got my insurance renewal and its jumped from around £260 to £413 even though I have full no claims bonus. Did get a £30 reduction last year though.

Tried I few comparisons sites and now feel like my current insurer is giving me a bargain, none of the others can quote me under £500, with ridiculous excess charges.