Why is comprehensive insurance often cheaper than TPFT ?

SouthLondonUser

(I am talking about cars; the opposite seems to be true, and not only in my experience, for motorcycles - which intuitively makes a lot of sense).

The most common answer, mentioned multiple times on this forum, too (yes, I did search the forum before posting), is that many insurers view those who apply for TPFT only as riskier drivers. However, I don’t understand the logic. In this day and age, once you have a quote, be it from an insurer or from a comparison website, it typically takes just one click to check how the price would change between TPFT and comprehensive. I understand most people are lazy etc, but it takes one click only. Are there still many people who check for one type of insurance only?

A comprehensive policy clearly exposes the insurer to the risk of paying much more. So why is it cheaper?

Is it just a way to charge consumers more? As in, insurers have worked out that they’d be happy charging, say, £80 for TPFT and £100 for comprehensive, but they are charging £100 for comprehensive and £120 for TPFT in the hope that people won’t notice?

Have they worked out that in most cases they can recover the extra costs from a third party? Eg the council, if an accident was caused by poorly maintained roads?

I understand that the black-box pricing algorithms can spit out nonsensical results at an individual level (I have had prices varying by 30% from one day to the next, with tracker more expensive than without, etc), but AFAIK this (comprehensive being cheaper) does not seem an isolated case.

Of course it’s just a curiosity with no practical implications, but I do wonder what the rationale is. Thoughts?

AndyMc.....

The policyholders attitude to risk.

Norman_Castle

TPFT is only sensible for low value cars. If the value is low or vehicle undervalued the driver may have little concern to protect their asset. A cheap car can cause as much damage as an expensive one.

SouthLondonUser

@Andy, those who fit a tracker may be viewed as a different category from those who don’t, to the extent the former are deemed to live in more dangerous areas, which justifies the expense and the hassle of fitting a tracker. This might be a reason why sometimes having a tracker can result in more expensive insurance. But how can those who apply for TPFT and those who apply for comprehensive really be viewed as two different categories with different risk profiles and attitude to risk, when all it takes to “switch” from one category to the other is one click of the mouse? It would only make sense if most people had never thought of making the one mouse click that is needed to compare comprehensive vs TPFT. I genuinely do not understand it. :huh: :huh: Or am I missing something?

AndyMc.....

SouthLondonUser wrote: »

@Andy, those who fit a tracker may be viewed as a different category from those who don’t, to the extent the former are deemed to live in more dangerous areas, which justifies the expense and the hassle of fitting a tracker. This might be a reason why sometimes having a tracker can result in more expensive insurance. But how can those who apply for TPFT and those who apply for comprehensive really be viewed as two different categories with different risk profiles and attitude to risk, when all it takes to “switch” from one category to the other is one click of the mouse? It would only make sense if most people had never thought of making the one mouse click that is needed to compare comprehensive vs TPFT. I genuinely do not understand it. :huh: :huh: Or am I missing something?

Yes, you are.

SouthLondonUser

@Andy, and what is it that I am missing? You mentioned different attitudes to risk but, like I said, I don't understand, since all it takes to go from the category of those applying for comprehensive to that of those applying for TPFT is one mouse click.

@Norman, what you wrote might explain why insurers charge more for comprehensive than for TPFT on old, low value cars: the driver won't be very careful with the old piece of junk he's driving. But it doesn't explain why comprehensive is cheaper on other cars.

Ectophile

Fully comp insurance says "my car is valuable, and I want to look after it". TPFT says "my car is a heap of junk, and if I write it off I will just buy another one".

But the insurers care far more about who or what you hit than they do about your car. For most motorists, if they write off their car, it will only cost the insurer a few hundreds or thousands of pounds. If they hit someone else, it could end up costing tens or hundreds of thousands in long-term injury claims.

That's why many insurers prefer drivers who go fully comp, and also why they offer cheaper insurance for classic cars, members of car clubs and so on. Those people care more.

SouthLondonUser

Ectophile wrote: »

Fully comp insurance says "my car is valuable, and I want to look after it". TPFT says "my car is a heap of junk, and if I write it off I will just buy another one".

Again, moving from the category of "careless driver who drives a piece of junk and wants TPFT" to "careful prudent motorist who wants comprehensive" requires one click only. It's not an intrinsic characteristic that I cannot (easily) change, like living in rural Nowhereshire vs busy London, or having years of NCB, or being or not being 18 years old. I can understand insurers charging more for these; the difference is that an 18-year cannot say: "ah, this is the price for 18-year olds, that is the price for 40-year olds, I'll get the 40-year old price as it's lower". But anyone can compare comprehensive vs TPFT.

Saying that applying for comprehensive signals you are a more careful driver would only work if it were impossible or very difficult and convoluted to compare comprehensive vs TPFT quotes, but it's not. Or if no one knew that comprehensive can be cheaper - but it's not exactly top secret information covered by the Official Secrets Act.

k12479

Ectophile wrote: »

Fully comp insurance says "my car is valuable, and I want to look after it". TPFT says "my car is a heap of junk, and if I write it off I will just buy another one"....That's why many insurers prefer drivers who go fully comp...

The logic of that is all erm, logical, but as SouthLondonUser points out it still doesn't quite add up. A supermarket for money website says TPFT can still be cheaper if you're 40+ female/50+ male and have 5+ years NCD. In my own case I'm much younger than 50 and my lowest value car was £10 cheaper for TPFT, so for that I went FC.

The biggest difference where FC is cheaper is for young drivers where it appears riskier drivers were trying to make costs more affordable by saving on insurance, so insurance cos. managed that risk my making TP/TPFT more expensive. But clicking different boxes on a quote doesn't change the risk, forgoing the say, Audi S3 for a regular A3 does.

I wonder if TP/TPFT policies are dwindling and following a certain demographic to extinction or the increase in cars on finance is creating an anomaly.

Car_54

Could it be that with TP the insurers don't benefit from referral fees from accident managers, solicitors, recovery companies ....

LandyAndy

Insurers do it that way because their statistics tell them that it is the most profitable way to go.