Motor Insurance Premiums – What are consumers doing?

Published by Cherry Chan on

Vikesh Gohil contributed to the writing of this blog

It’s nearly been a year since the EU gender ruling kicked in and over this period motor premiums have fluctuated, with the latest trend indicating that the average premiums are reducing. The introduction of LASPO 1 and other factors have driven these reductions.

The introduction of LASPO has led to reduced claims costs and in turn this saving has been passed on to consumers in lower insurance premiums. There has also been evidence of regional price movements; areas with a high concentration of claims management companies such as Manchester and Merseyside have noticed a large premium reduction. Also data availability and enhancements have allowed insurers to be more positive and confident when pricing their premiums, consequently leading to premium reductions in certain segments of the market. Another factor which is mostly highlighted in young drivers is the use of telematics which generally pushes the average premium down.

Every logical consumer would want to get the premium as low as possible. There are many factors that consumers consider when taking out a motor insurance policy. So what have consumers been doing to combat the cost of car insurance?

Type of Car

There are many ways that consumers are trying to reduce their car insurance premiums on traditional policies. One of the most obvious factors in the price of a premium is the car under consideration. If they haven’t purchased the car yet, then ideally consumers will want their car to be sufficient enough for their wants and needs, yet in a low insurance group. Every car belongs to one of 50 insurance groups which are set by a rating panel and a lower group correlates with a lower premium. These groups are determined by a range of factors such as the performance of the car, the car’s security features, the costs of parts for repair or replacement, the time and costs involved in maintenance and the value of the car brand new. Consumers are taking into considerations the make and model of their car and affordability of the premiums when choosing a suitable car.

Policy and Drivers details

Furthermore consumers are shrewdly filling in their policy forms to help reduce their premiums. For example, by reducing mileage or taking higher excess on a policy, the premium can be reduced. Obviously these will have to be genuine changes and consumers will have to keep their integrity when filling in the application as anything written that is not true is fraudulent and could make their policy void. There are many other factors on an application form that have a bearing on premium including:

  • Marital status – married men can get cheaper premiums than single men.
  • Parking the car overnight on a driveway or in a garage reduces car theft and consequently premiums.
  • Adding some sort of immobiliser to increase the security of a car can reduce premiums.
  • Adding a ‘safer’ second driver may help lowering the premiums
  • Occupation – slight variations in job titles can have an effect on the premium

Also consumers are considering their own personal needs. Some are opting to take comprehensive cover only if they need it. Otherwise it may be more beneficial to take out a third party, fire and theft policy. This is particularly the case if the value of the car isn’t significant in the first place. And generally if consumers can afford to, they opt to pay the premiums in full at the beginning of the policy rather than paying monthly premiums which usually aggregates to a higher value over the year.

Shopping around

Consumers are becoming more savvy and are aware of the benefits of looking around. They are not afraid to move insurance providers or negotiate with current insurers to drive their premiums down as some insurers are giving discount to new customers and not rewarding their ‘loyal’ customers. Under this concept, consumers would be better off if they changed insurers every year.

Comparison websites have made getting a range of quotes a whole lot easier. They give a clearer picture of the range of cover that is out there and shows the range of premiums being offered for these policies. Of course, consumers still need to find time to do this! Aside from being the cheapest, we do believe people are willing to pay a little bit more for the brand name than a new start up insurer.

Telematics

Those of you who have been following our blogs will have heard of telematics many times before. It is helping to reduce premiums for younger drivers. Surprisingly many drivers, in particular young drivers between 18 and 24, are reluctant to use a black box. They oppose the use of ‘big brother’ technology and don’t like the idea of their driving traits being constantly monitored and recorded. This makes sense for the stereotypical ‘boy racers’ type of driving. It is as though they are being upfront because they know that they will not see any benefit as their driving habits are clearly not safe enough to be eligible for a premium reduction.

The use of telematics also restricts the driver’s style of driving and sometimes enforces curfews on policies with fines attached to them.

Conclusions

Maybe it’s time to clear out the garage, change cars or even have a black box fitted! Having a car is often seen as a necessity in today’s generation, after years of rising premiums consumers are finding ways to combat the inflation and make it as affordable as possible to insure their cars.

1 The Legal Aid, Sentencing and Punishment of Offenders Act 2012