Motor Insurance Increased by 100% 6 October 2022 at 3:42PM in Insurance & life assurance 8 replies 171 views

Shirl148

Does anyone know how renewal premiums are calculated please?

My motor insurance has always been more or less the same for 14 years (same address). My renewal premium due in November has increased by 100%. Last year it was £164 and is now £328.

I did have a non-fault claim last year. The third party admitted fault and I did not lose my NCD. I get auto renewal prices from the comparison sites and when I added the claim, it only increased it by £30 max with some insurers. So I was expecting only a £30 increase in my insurance not the £164 it has increased by. The quotes from the comparisons site were close to my renewal price too. 

I did however, default on a credit card during covid (Freelancer, lost income). This default took a year to register on my credit file (last year). I am currently on a repayment plan but this does not show up on my credit file against the default. My score is currently " fair" on Experian and " good" on Equifax. 

Does anyone know if the default on my credit card has caused the 100% increase in my renewal premium? Bearing in mind I do pay annually not monthly. 
Or has every ones motor insurance premiums increased by a similar amount due to Covid, rising Energy prices, etc?

Thank you in advance

DullGreyGuy

Did you renew last year or buy new? If you bought new then the most likely explanation is that you are seeing the impact of the FCA regulation changes that basically outlawed new customer discounts meaning long standing customers see price decreases and new(ish) customers are likely to see price increases as the two are averaged out.

Have you spoken to your insurers about the current state of the claim? How does it show on your renewal docs? If its still open it may be impact your policy as if it was a fault as this is the default until your insurer recovers their outlay... theres always a risk they cant. 

Now that loyalty has been removed as a rating factor then new business and renewals will be priced almost the identical way (assuming you arent on a retired product in which case loyalty loadings can be added). Some insurers do consider credit rating as a rating factor, effectively as a fraud indicator, but the percentage impact tends to be much lower... last one I saw would load up to 20% for a very poor score. 

dunstonh

I did have a non-fault claim last year. 

Some insurers will hold that against you.  Statistically, those that suffer a claim are more likely to suffer another one in the short term after.  Even if its not your fault.

I did however, default on a credit card during covid (Freelancer, lost income). 

That can work against you with some providers. Paying monthly for insurance is already priced at sub prime rates.  So, not all do it but some do.

As mentioned above by DullGreyGuy (nearly wrote the old login. Sa....), with early year discounting gone, you may have had some on your previous policy if you only bought it with them in the last year or two.

 

Shirl148

DullGreyGuy said:

Did you renew last year or buy new? If you bought new then the most likely explanation is that you are seeing the impact of the FCA regulation changes that basically outlawed new customer discounts meaning long standing customers see price decreases and new(ish) customers are likely to see price increases as the two are averaged out.

It was a renewal, my second year with company. It was £144 in 2020 then £164 in 2021.

Have you spoken to your insurers about the current state of the claim? How does it show on your renewal docs? If its still open it may be impact your policy as if it was a fault as this is the default until your insurer recovers their outlay... theres always a risk they cant. 

Yes, they got paid in full and they said it is settled and classed a non-fault claim. However, it does not state non fault on my renewal. It shows as below on my renewal documents. 

"Has any driver been involved in any accidents, made a claim 

or caused any damage to a vehicle in the last 3 years whether

or not a claim was made and regardless of blame?"
Yes

"Incident Type
Multiple Vehicle
NCD Affected"

No

Now that loyalty has been removed as a rating factor then new business and renewals will be priced almost the identical way (assuming you arent on a retired product in which case loyalty loadings can be added). Some insurers do consider credit rating as a rating factor, effectively as a fraud indicator, but the percentage impact tends to be much lower... last one I saw would load up to 20% for a very poor score. 

My score is still fairly decent considering the default. Possibly my payments all being on time with everyone is a factor? I expected it to a poor score when I checked yesterday. I am pretty sure it was already at fair at last year's renewal too though? 

I did ask my insurer why it has increased by 100%, they said they didn't know. They said the likeliest factor could be that my postcode has changed in risk factors and now deemed high risk. 

 Thank you for your reply, much appreciated. Please see my reply in bold above.

Shirl148

dunstonh said:

I did have a non-fault claim last year. 

Some insurers will hold that against you.  Statistically, those that suffer a claim are more likely to suffer another one in the short term after.  Even if its not your fault.

I did however, default on a credit card during covid (Freelancer, lost income). 

That can work against you with some providers. Paying monthly for insurance is already priced at sub prime rates.  So, not all do it but some do.

As mentioned above by DullGreyGuy (nearly wrote the old login. Sa....), with early year discounting gone, you may have had some on your previous policy if you only bought it with them in the last year or two.

 

Thank you for your reply, Much appreciated too. 

I always pay for my motor insurance in one annual payment, would the default also be taken into account for this payment method? My quotes are all based on a one off payment. 

I wasn't a new customer, the 100% increase is on a renewal quote. That said, I have not found it cheaper on comparison sites so it obviously is the price I will have to pay. I expected an increase with the Non fault claim and general inflation etc. It just feels really high at an 100% increase. Even if it was my non fault claim and default, I thought worse case scenario I would pay 30-40% more. 

Aretnap

Shirl148 said:
My score is still fairly decent considering the default. Possibly my payments all being on time with everyone is a factor? I expected it to a poor score when I checked yesterday. I am pretty sure it was already at fair at last year's renewal too though?  

Credit scores don't really mean a lot TBH - they're mostly a marketing gimmick used by credit reference agencies to encourage you to sign up to their subscription services. Insurers and banks will assess the underlying information according to their own criteria, which may have little or no resemblance to the way the reference agency calculates your credit score.  It may be for example that the insurer simply notes the default as a ratings factor, and pays no attention to the other details. A credit card provider might look at things completely differently - and a second credit card provider differently still.

Shirl148 said:
I did ask my insurer why it has increased by 100%, they said they didn't know. They said the likeliest factor could be that my postcode has changed in risk factors and now deemed high risk.  

It's very unlikely that they person who answers the phone when you call the insurer has access to the underwriting algorithm. He just punches your details into a computer and seen it sit out a number. So any explanation he offered you will be little more than guesswork on his part.

DullGreyGuy

Aretnap said:
Credit scores don't really mean a lot TBH - they're mostly a marketing gimmick used by credit reference agencies to encourage you to sign up to their subscription services. Insurers and banks will assess the underlying information according to their own criteria, which may have little or no resemblance to the way the reference agency calculates your credit score.  It may be for example that the insurer simply notes the default as a ratings factor, and pays no attention to the other details. A credit card provider might look at things completely differently - and a second credit card provider differently still.

At least one insurer uses, or at least used to use, the credit score as calculated by Experian as a rating factor. Admittedly it was at the start of their attempting to validate the relationship between credit history and claims history (the theory being that those in financial distress may be tempted to liquidate assets via claims) and so could have refined it by now with their own criteria but I suspect not. 

Shirl148 said:
It was a renewal, my second year with company. It was £144 in 2020 then £164 in 2021.

It is fairly likely you still were getting some new customer discount then, insurers tended to run it off over the next 1-3 renewals so you dont immediately jump ship... now it cannot exist at all.

dunstonh

At least one insurer uses, or at least used to use, the credit score as calculated by Experian as a rating factor. Admittedly it was at the start of their attempting to validate the relationship between credit history and claims history (the theory being that those in financial distress may be tempted to liquidate assets via claims) and so could have refined it by now with their own criteria but I suspect not. 

In the borrowing world, many lenders use Experian's data but none of them use Experian's scoring system.   Maybe the insurers need to use it as they don't have the experience of analysing credit data in the same way banks can (or used to as I am not sure lending skills are what they used to be at banks).

DullGreyGuy

dunstonh said:

At least one insurer uses, or at least used to use, the credit score as calculated by Experian as a rating factor. Admittedly it was at the start of their attempting to validate the relationship between credit history and claims history (the theory being that those in financial distress may be tempted to liquidate assets via claims) and so could have refined it by now with their own criteria but I suspect not. 

In the borrowing world, many lenders use Experian's data but none of them use Experian's scoring system.   Maybe the insurers need to use it as they don't have the experience of analysing credit data in the same way banks can (or used to as I am not sure lending skills are what they used to be at banks).

I'm aware and yes they certainly didnt have the skills... there was almost an 11th hour pull of the whole idea as someone asked if the search would impact a customers ability to secure credit and no one internally could answer the question.

It could be that they have invested more time/effort since and realised defaults, ccjs etc are really better measures of those that may become opportunistic than just someone who's score is low because they're heavily leveraged and not on the electoral roll but I'd be a little surprised... I suspect the correlation isnt particularly strong and so as a modest rating factor you dont want to invest too much time/money into refining it.