How can car insurance premiums be reduced?

cepheus

One major reason why our premiums are rising was explained in the BBC watchdog programme a few days ago

The insurance companies themselves are locked in a money merry-go-round that encourages more and more personal injury claims.

This is how it works. If you're injured in an accident your insurance provider can pass your details to a personal injury lawyer, or a claims management company who will act as a middle-man and find a solicitor for you. In return, lawyers and claims management companies pay the insurer a referral fee, which can be as much as £900.

If your claim is successful, the lawyer demands compensation for your injury from a third party insurer - as well as a bill to cover his own hefty fees. Nice little earner for him.

The third party insurer may have lost out this time, but meanwhile, he'll be receiving referral fees from other lawyers who are demanding payments from other insurance companies for other accidents.

Round and round it goes, and - in the middle - the claims management industry, raking in fees. Fees that have to be recovered through increased premiums.

Most claims management companies are reputable, providing valuable advice on where to get the right lawyer and proper compensation for a genuine injury, but not all. Some use aggressive marketing techniques - pressuring people into making a claim when they haven't been injured at all.

I can believe this, since last year I was involved in a minor bump which didn't result in any damage, less still an injury. However for month's afterwards my mobile phone kept receiving texts about injury claims. How they knew I have no idea.

How could we reduce this? Could a basic level of third party insurance be offered to drivers which exempt them from claiming against a third party. This might avoid the temptation for drivers and laywers to 'try it on' and would drive down legal and medical costs.

In fact this basic insurance could be added to the cost of fuel, which covered claims against experienced drivers, whilst less experience drivers would have to take out additional insurance with a company in the form of an annual premium.

Another method would be to pay out liability costs only if the vehicle acceleration or cost of damage during the accident exceeded a certain level.

If experienced drivers wanted a higher level of insurance covering third party claims, that would be their choice.

mikey72

Or just fine the insurance company every time they pass your details on, rather than letting them get commission from it.

cepheus

There are just too many middlemen attempting to increase costs. Competition alone probably isn't the solution. The general idea was to simplify insurance & cut admin and overheads (for the experienced) to reverse this trend.

alistair.long

There are lots of reasons why insurance premiums are increasing, I have written on many posts of my experience of insurance claim handlers that dont want to sort out the problem and so I have to get solicitors to sort it out, I am doing things myself now to speed things up.

Having third party cover will not stop this compensation stuff because if its not your fault you have to be compensated by the other side, who will cover you but not thereselves (as they have third party).
Then you will get the senario of blaming each other to try and not get claimed off and to get your car sorted for free.

Vehicle acceleration is used nowadays in court by Solicitors/insurance companies. They call it Low Volicity Impact.
Sometimes you do get a LVI however there may be some damage to your car, scrape damage or broken wingmirror, etc...

Increased premiums are for insurance companies to make more money, if you look at their last year profits you will know that they made money so why increase the premium?

cepheus

Having third party cover will not stop this compensation stuff because if its not your fault you have to be compensated by the other side, who will cover you but not thereselves (as they have third party).

Still trying to understand this. Perhaps I don't mean third party but 'road traffic act' the minimum insurance necessary to legally drive. I don't think you can claim under any circumstances with this, whether it is your fault or not. Why wouldn't this reduce costs overall?

Even claims for comprehensive insurance could be made tougher. It's not much good chasing clients for compensation if there is no claim possible below a certain acceleration level.

I also believe that car manufacturers could reduce insurance costs by designing cars which can withstand minor collisions without damage, just like dodgem cars at the fair. Instead, bumpers are made brittle, unsprung and unable to absorb shocks without chassis deformation, I wonder why?

With regards profits, according to economic theory, competition should have driven profits down. So what's happening; a cartel, or lethargic customers unwilling to switch?

FlameCloud

cepheus wrote: »

Still trying to understand this. Perhaps I don't mean third party but 'road traffic act' the minimum insurance necessary to legally drive. I don't think you can claim under any circumstances with this, whether it is your fault or not. Why wouldn't this reduce costs overall?

Even claims for comprehensive insurance could be made tougher. It's not much good chasing clients for compensation if there is no claim possible below a certain acceleration level.

You really need to understand that you cannot contract out of a right given to you in law (i.e. the ability to sue somebody for negligence).

The majority of costs comes from third parties sueing insures for injuries when their driver has caused a crash. Them having a policy that stops their own driver sueing will not help at all in this situation.

FlameCloud

cepheus wrote: »

I also believe that car manufacturers could reduce insurance costs by designing cars which can withstand minor collisions without damage, just like dodgem cars at the fair. Instead, bumpers are made brittle, unsprung and unable to absorb shocks without chassis deformation, I wonder why?

With regards profits, according to economic theory, competition should have driven profits down. So what's happening; a cartel, or lethargic customers unwilling to switch?

Put two dogems into each other at 50mph and see what happens to the occupants. Car bodywork is deliberatly damaged in collisions because the main shock of the impact is transfered to the body work and not the squishy humans inside.

Compare a 1980's car against a modern one. This is what you want to go back to.

cepheus

You really need to understand that you cannot contract out of a right given to you in law (i.e. the ability to sue somebody for negligence).

I see what you mean, but is this enshrined in law without exclusions? For example, what about an incompetent military or political decision such as WMD?

Are there ways around it? The road traffic act had a limit of liability already, what prevents this being reduced?

The majority of costs comes from third parties suing insures for injuries when their driver has caused a crash. Them having a policy that stops their own driver suing will not help at all in this situation.

Your thinking as an isolated driver than a community, I blame the culture which has evolved over the last through decades. People are unable to see the advantages of communal systems.

It's a bit like the prisoners dilemma isn't it? The best solution for both parties is that I won't sue you if you won't sue me. The same applies to groups such as insurance companies (providing a similar proportion of drivers within each group agree to these terms). However, getting businesses to cooperate for their clients benefit is like rounding up cats. That's why I suggested a national scheme for base insurance based on a petrol tax. The reduction in insurance costs by even 1% of drivers agreeing to this scheme could be borne by the savings in 1% not suing.

A nightmare for the legal industry though! Better kill it before it get's off the ground.

dacouch

As Flamecloud mentioned the Road Traffic Act specifies that motor insurance is for a minimum of Third Party Cover with no monetary limit on injury claims. Property Damage (Including other vehicles can be limited).

The RTA is not just a law that applies to the UK, European Countries also have to have laws that offer similar limits to protect their members either from our visitors or their visitors. So it is not just a case of the UK opting out of it.

I can't see anyone in their right mind agreeing to opt out of being able to sue for an injury as injuries can be life changing and on occassions need compensations running into the many millions to cover future loss of earnings and 24 hour nursing etc.

The other issue is the motor insurance is not just about protecting other drivers from your damage but is also their to protect pedestrians etc from the injuries caused by drivers.

The idea of Insurers not pursuing each other is a non starter as they used to do this (It was called "Knock for Knock") and it did not work as it gave an advantage to certain Insurers who could then offer cheaper premiums at the expense of the other Insurers customers.

If you have ever worked in Whitehall, you would not want the government to administer third party insurance as they would end up charging considerably more

lisyloo

We could also try to put some effort into avoiding accidents as a nation.
Not only is there the economic cost but also the potential life changing injuries.

I do some voluntary work for ROSPA in advanced riding on the motorcycle side and I really believe in what they do.
But I don't know what the answer is to bring up driving/riding standards but I do know it's hard and that's why the government prefer easy answers like speed cameras.

cepheus

The idea is that you would get considerably reduced insurance for opting out, precisely for the reasons I gave. Many young people would do anything to reduce their premiums and they are more than happy to 'take chances'.

However, there would be so much opposition and misleading information created by the insurance industry, it would be difficult to do this.

Perhaps a more practical solution might be to look at a way of avoiding the sort of claims in which the legal costs are escalating, and are proportionately expensive. For example opt out of no win no fee and claiming on all bumps below a certain severity which is rigourously defined through dynamics. etc.

If we have safer cars then it should be cheaper to insure not more expensive, so something is going badly wrong.