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Car insurance claims: premium hikes hit the blameless too

Car claim

Did you know if someone damages your car, your premium could rise too?

In the world of insurance, if you hit my car and drive off, I’m at fault and it’ll cost me in higher premiums. Even if I pay for the repairs myself rather than claim for them, my premium will still rise by 15% if I’m with Esure, for example.

Several Which? members got in touch recently to tell us their premiums had leapt following an incident that wasn’t their fault. One member’s quote jumped by £300 to £1,100 after she mentioned a claim for a chipped windscreen.

Increased insurance risk

Insurers consider any incident indicates a greater risk of future claims, but we decided to test how much 12 different insurers would add to their quotes if you told them about an incident where you were not to blame.

The biggest premium hike in our test was Esure’s. It added 39% when we said someone had scraped our car when it was parked, and we’d made a claim against the insurance. But LV added nothing. We found the average rise was 22%.

While the quotes varied hugely, so did the way insurers asked the questions before quoting and the extent to which they explained important facts and terminology. And there is plenty of terminology to explain.

Insurers consider you ‘at fault’ unless they’ve been able to recover the cost of a claim from elsewhere (usually the other driver) after an incident. Fault has nothing to do with who was to blame and everything to do with where the money comes from. Of course most people don’t know this – that’s four in five, according to our survey. Why should they, unless it’s clearly explained? But this is an industry where explanations are not easy to come by.

Premium prices

Insurers are notoriously cagey about the factors behind an increase in your premium. I tried this recently with mine, and got the longest non-answer I’ve heard for some time.

One bit of information conspicuous by its absence has long been the premium you paid last time around, which you naturally want to know when you’re about to renew. Which? has called for insurers to show the previous year’s premium on renewal notices for years, and the Financial Conduct Authority has just announced that companies must implement this by 1 April next year.

This reasonably straightforward reform has moved at the pace of a distracted snail. But there’s nothing to stop insurers getting on and putting last year’s premium on their renewal letters now – indeed at least one, Axa, already does it.

It’s high time the rest of the industry did so, too, rather than waiting for yet another half a year to pass while premiums quietly rise for reasons that customers don’t really know.

Over to you

Are you paying premium prices for your car insurance? Have you noticed your car insurance jumping up in price after a claim that wasn’t your fault?

Comments
Profile photo of Patrick Taylor
Member

Are you paying premium prices for your car insurance? Have you noticed your car insurance jumping up in price after a claim that wasn’t your fault?

A] No.
B] I am with LV so don’t think it likely to happen either judging by your research. LV are good.

You are correct that the “fault” term is misleading. In an industry where many people lie about how their cars get damaged it is not surprising that premiums will increase after an “incident”.

I am slightly bemused how you managed to research the subject as unless you have exactly the same person registered at all 12 insurers I cannot see how this can be done. Insuring the same car 12 times I suspect is a near criminal offense and may well be picked up by the insurers sharing information.

Leaving that aside I have mentioned previously the construction of “books” where an insurer may want a certain type of client but already has a sufficiency of another sort. There is also the geographical spread which is a very fundamental part of all insurances. I am not privy to the current inside workings of the major insurers so perhaps you could check the “book2 concept is true and post an answer.

Perhaps you can explain how the research was done.

P.S. “One member’s quote jumped by £300 to £1,100 after she mentioned a claim for a chipped windscreen.” That sounds an interesting one. I used to broker car insurance. Does she also live in areas where flood damage to cars has occurred? Has she had other incidents in the last 5 years?

Member
Liz Edwards says:
12 September 2016

Hi Dieseltaylor
thanks for your comments. The research was done by obtaining quotes from the various insurers for each scenario (no claim vs non-fault claim etc) with everything else remaining the same. It was intended simply to show examples of how these incidents can affect quotes. What also emerged, though, was how different insurers ask the questions differently – so for some it proved difficult to explain the circumstances of the incident.

Member
dieseltaylor says:
13 September 2016

Thank you for the explanation.

The Conversation surely would be more useful if the reasons why various companies treat risk differently would be beneficial to the public. Just portraying insurance companies as being completely arbitrary in how they load premiums after a no-fault incident does not explain why they do it.

Esure’s claims record may reveal that those people who claimed no-fault accidents generally were more expensive than the average driver – and they did not wish to take on anymore.

I have provided a possible reason why it is logical for companies to wish to attract some customers and deter others. If I am correct then the British public would then understand why there is a price differential for logical reasons.

However I am gaily talking about the “book” and perhaps you could confirm that insurance companies construct a portfolio of risk and this affects how they charge.

Member
Liz Edwards says:
1 October 2016

Hi Dieseltaylor
Thanks for your suggestion. The insurance companies we highlighted had the opportunity to explain the results and we reflected their responses in the article. From the consumer’s point of view, I think the most useful information was that there can be large differences in the way companies treat different claims histories, underlining the need to shop around.

Member
Paul says:
10 March 2017

I am insured with LV, who Which found did not increase premiums.
I have just had my renewal quotation and informed them of an incident – my car was hit by another driver who’s insurance arranged for my repairs – a clear no fault incident.
My renewal premium rose by an extra £4 – not happy and alternative quotes with the same details are nearly £70 less.

Profile photo of wavechange
Member

Motor insurers require drivers to inform them promptly of accidents, irrespective of who is responsible. It’s difficult to know if the rise in premium is due to the accident or would have happened anyway.

Profile photo of malcolm r
Member

It is not just about “no fault” accidents. As I understand it being involved in an accident is regarded as an increased risk and may affect the premium. £4 does not seem much. Also check the change in tax was not the cause in the rise. The main thing is to ensure your alternative quote gives all the cover you want.