Variation in car insurance prices depending on start date of policy?

vikinggreen

Just hunting down car insurance for a family member using a price comparison website.

Entering a start date of tomorrow results in a price nearly 15% higher than a start date in 14 days time, and it's almost the same across the board for every insurer.

Simple question: why on earth ...???

ilikewatch

vikinggreen wrote: »

Just hunting down car insurance for a family member using a price comparison website.

Entering a start date of tomorrow results in a price nearly 15% higher than a start date in 14 days time, and it's almost the same across the board for every insurer.

Simple question: why on earth ...???

Because someone who needs insurance tomorrow could be seen as desperate and more likely to take the first quote offered? There's probably some also some risk assessment that they use that shows that people who leave things to the last minute are more likely to make a claim.

Aretnap

Off the top of my head it could be some combination of the following...

1 Fraud risk. If you have an accident or your car is stolen and you're uninsured there must be a temptation to buy cover for immediate start, then phone up and say"you'll never guess what's just happened". Depending on the circumstances it may not be easy for the insurer to prove that the incident took place before the policy started. If you're buying cover for two weeks hence it's much less likely that's your intention.

2. Attitude to paperwork. If you're the sort of person who doesn't deal with your renewal until the day it's due there's a fair chance that you're also the sort of person who takes three days to tell your insurer when you have an accident. And there's little insurers hate more than people who take three days to report an accident, especially accidents involving damage to third parties - it can greatly increase their costs if the third party gets an accident management company involved before they have chance to contact him and offer to sort his repairs out themselves.

3. General personality type. If you sort out your insurance two weeks in advance you're obviously an organised, forward thinking person. Maybe that's also reflected in your driving style.

4. Commercial considerations. People buying insurance in a hurry are doubtless less price-sensitive than those buying weeks in advance so why shave your profit margins to give them your lowest price when you don't need to?

Mungo76

Simple sales, as a business if you know you have x amount coming in the next month therefore hitting your targets, keeping the cash flow going, then you are going to discount to get it.

If you sell 4 premiums a month it's not worth it, but if you sell 4,000 or 40,000 you will discount.

paddyandstumpy

Mungo76 wrote: »

Simple sales, as a business if you know you have x amount coming in the next month therefore hitting your targets, keeping the cash flow going, then you are going to discount to get it.

If you sell 4 premiums a month it's not worth it, but if you sell 4,000 or 40,000 you will discount.

Reasonable logic, but I can tell you this had nothing to do with it where I used to work.

It's purely performance related; crashes that had just happen, cars stolen overnight, tree fell on car etc...

vikinggreen

Interesting replies, and thank you.

It never occurred to me that people would try to insure a car that had already been damaged. I've obviously led a sheltered life!

If anyone has a definitive answer, I'd be interested to hear it. Idle curiosity maybe, but perhaps the information might be useful to people who do need insurance at short notice for whatever legitimate reason.

paddyandstumpy

vikinggreen wrote: »

Interesting replies, and thank you.

It never occurred to me that people would try to insure a car that had already been damaged. I've obviously led a sheltered life!

If anyone has a definitive answer, I'd be interested to hear it. Idle curiosity maybe, but perhaps the information might be useful to people who do need insurance at short notice for whatever legitimate reason.

Definitive answer for what? Aretnap's details post details exactly why insurers load rates based on the difference in quote and inception date.

vikinggreen

paddyandstumpy wrote: »

Definitive answer for what? Aretnap's details post details exactly why insurers load rates based on the difference in quote and inception date.

Aretnap has posted what he speculates may be the reasons. He may well be right, but it would be helpful to know for a fact whether any or all of his thoughts are correct.

paddyandstumpy

vikinggreen wrote: »

Aretnap has posted what he speculates may be the reasons. He may well be right, but it would be helpful to know for a fact whether any or all of his thoughts are correct.

The reasons are correct.

From experience; quote lag rating is used for the reasons suggested in that post.

vikinggreen

OK, thank you. Would the same thing apply to other forms of insurance: house, travel, etc?

Over the years I have occasionally bought insurance quite close to the renewal date, date of travel, etc, and I wonder if I've ended up paying over the odds because I am classified as "disorganised"?

I do always compare prices, but if all those prices are inflated towards the date of commencement of the policy, then I guess I have!

paddyandstumpy

Not every insurer will use quote lag, and for those that do; they will use it to various degrees.

15% load for 2 days between quote and inception isn't unreasonable, based on the data I've seen in the past.

The data I've seen has been geared towards home insurance, where it's more weather and theft claim related.

I would be surprised if it's used on travel insurance; but annual contracts like home and car most definitely.