MSE News: Drivers face soaring car insurance costs

mikey72

raskazz wrote: »

Nothing is 'out of balance'. Premiums are reflective of risk. The reason why a 17 year-old male driver would pay 8x what a 35 year old pays (other things being equal), is because they present 8x the risk to the insurer.



What do you mean, 'shafted'? Are they being 'shafted' because they pay a premium which reflects the risk they present? If you are implying that insurers are making abnormal profits out of young drivers then please link to your evidence.

I say this every time this topic comes up (along with the inevitable ill-informed posts from people who do not understand the market):

The only way to reduce the insurance premium required to cover young drivers is to reduce the risk that they present. This means reducing the frequency with which they crash, reducing the severity of those crashes, or both. The means by which this is most easily acheived is by the Government radically reforming driving tuition, testing and licensing.

I thought the popular figure was teenagers were 15 % of the drivers, but had 30% of the accidents?

mikey72

Quote wrote: »

The problem with Mikey, and his ilk, is that they imagine that they're saving money. If you accept a premium of £200 instead of £300 you're not saving £100 any more than you'd be saving £1000. You're still spending money.

And even if you think you're saving £100 every year, that's only £5,000 over a lifetime, or £2 a week. Either way it's a piffling amount of money.

People should be more worried about the week of life they waste on comparison websites.

Keep on track.
This is about the cost of insurance, not don't compare prices or go direct.
£5000 for one weeks work.
Everyone should do it based on your figures, and you're in the industry, so who better to recommend it!

dacouch

Percy1983 wrote: »

This where my argument lies, how they calculate risk.

I have been classed as high risk all the time I have been driving, I have spent £6000 on insurance and never got a penny back, in that 7 years my dad has had 2 accidents yet still gets cheaper quotes. yet if you go from recent form the stats must say I am the safer driver?

Insurance works on the pooling of risk, this in effect is the risk is shared out amongst all of the Insurers millions of customers.

If it did not work like this then someone who had an accident of tens of thousands of pounds (It's not that unusual) would be paying many thousands of pounds in premium for each year for many years.

The £6000 you have paid in premiums could very easily be wiped out tommorow in an accident that costs your insurers £20000. The way Insurance works for someone of your age (27) means your premium won't go up by thousands but a relatively (In comparison to your claim costs) small amount

raskazz

Percy1983 wrote: »

I have been classed as high risk all the time I have been driving, I have spent £6000 on insurance and never got a penny back, in that 7 years my dad has had 2 accidents yet still gets cheaper quotes. yet if you go from recent form the stats must say I am the safer driver?

You cannot rely on individual cases to make any sort of relevant point here.

Insurers rely on statistics and trends garnered from large pools of data, in conjunction with sophisticated pricing structures to calculate a premium at which they aim to make a profit. There will always be exceptions; but, to take such a granular approach would involve subjecting each driver to a bespoke psychological profile and face-to-face driving assessment by a skilled examiner - which is clearly impractical due to cost.

Percy1983 wrote: »

My insurance these days is much more reasonable but I am still treated as guilty until proven innocent because 7 years no claims isn't enough proof I have broken my genetic coding which will is makes me 99% certain I will crash.

It is not a question of 'guilty' or 'innocent', it is a question of risk.

As you are no doubt aware, there are many factors which influence a private car premium:

Age
Gender
Area
Licence type/time held
Socio-economic group
Marital status
Occupation
Vehicle make/model/age/value/length owned
Vehicle modifications
Vehicle security
Annual mileage
Overnight parking
Use
Drivers
NCD
Claims history
Conviction history (motoring and non-motoring)

So for you to say stuff like "7 years no claims isn't enough proof I have broken my genetic coding which will is makes me 99% certain I will crash" is overly melodramatic as your gender is merely one of several factors which influence the risk.

Percy1983 wrote: »

Right now it would seem the young sensible ones just pick up the tab for the 'protected no claims' 40+ crashers

Do you actually have any evidence for this?

If you want to gain a basic understanding of motor insurance, age, gender and risk you could start by reading the following:

http://www.abi.org.uk/Facts_and_Figures/44435.pdf

http://www.equalities.gov.uk/pdf/The use of age-based practices in financial services Final report.pdf

Quote

mikey72 wrote: »

£5000 for one weeks work.

Earned over the space of 50 years. Whoop-de-do. Don't spend it all at once. Because you can't.

raskazz

mikey72 wrote: »

I thought the popular figure was teenagers were 15 % of the drivers, but had 30% of the accidents?

And??!? :huh:

mikey72

raskazz wrote: »

And??!? :huh:

Well if you are agreeing with those figures, if you do the maths, it makes them twice as likely to have an accident, not 8, so apart from profiteering how else is the cost justified?

raskazz

mikey72 wrote: »

Well if you are agreeing with those figures, if you do the maths, it makes them twice as likely to have an accident, not 8, so apart from profiteering how else is the cost justified?

Er

Risk = Severity of loss * Frequency of loss

For example, who is the higher risk group:

Group A: 30% claim frequency and £500 claim severity

or

Group B: 10% claim frequency and £2000 claim severity

???

(In other words, you appear to have conveniently overlooked the fact that not only are young drivers more at risk of having an accident, but when they do have accidents they cost substantially more on average than accidents caused by 35 year-olds)

PS I was not claiming that 8x is the specific differential between the two risk categories; merely trying to illustrate to Percy that in a competitive market premiums are incredibly highly correlated with risk; if the market was trying to charge 8x the rate between group A and group B when there was, for example, only 7x the difference in risk, an insurer would soon exploit this opportunity to gain a lot of profitable business at, say, 7.5x the rate.

Percy1983

Interesting links there raskazz.

I figure a few things which could really help here.

1, limit the driving age to 20
2, limit the cars which can be legally driven for the first 2 years (nothing powerful basically)
3, Remove age from the equation as the line will be reasonably stable then, the young/old will be slightly better off and the middle lot will all be slightly worse off, but of course they had it easy when young so all will level out.
4, Remove gender from the equation as the other systems will soon separate good and bad drivers so a safe male driver gets the same as a safe female and like wise bad drivers get the same, yes the bad drivers group will be more male than female but at least the good driving males aren't picking up the bill for the bad.

It just seems there is a huge protection for all those in the middle of the curve, but as shown above if they all pay £50 a year more it can take the steepness off the young/old sides of the curve, to which they where young once and a risk and they will probably get old.

raskazz

Percy1983 wrote: »

Interesting links there raskazz.

I figure a few things which could really help here.

1, limit the driving age to 20
2, limit the cars which can be legally driven for the first 2 years (nothing powerful basically)
3, Remove age from the equation as the line will be reasonably stable then, the young/old will be slightly better off and the middle lot will all be slightly worse off, but of course they had it easy when young so all will level out.
4, Remove gender from the equation as the other systems will soon separate good and bad drivers so a safe male driver gets the same as a safe female and like wise bad drivers get the same, yes the bad drivers group will be more male than female but at least the good driving males aren't picking up the bill for the bad.

It just seems there is a huge protection for all those in the middle of the curve, but as shown above if they all pay £50 a year more it can take the steepness off the young/old sides of the curve, to which they where young once and a risk and they will probably get old.

Interesting points and I hope I have clarified some of the relevant issues.

However, I do not agree with removal of the use of age or gender to differentiate risk. I see absolutely no reason why young females should subsidise the insurance of idiot testosterone-fuelled teenage male drivers - and I say that as a (relatively) young male.

Any attempt to eliminate pricing by gender would fail spectacularly anyway - all that would happen is that insurers would (a) just pull out of that sector of the market, leaving less competition, resulting in increased rates and (b) those that remained in that sector of the market would just increase rates for young female drivers to be equal to that of young male drivers. Males would see no reduction at all and females would be a lot worse off.

Likewise I don't think capping vehicle groups would be useful. If some 17 year old bonehead wants to pay £50000 a year to insure his Subaru Impreza then let him go for it.