Car insurance is a grudge purchase for many of us and sadly it’s not a cheap one. To further increase the burden, the cost of car insurance continues to creep up, but why?
With premiums on the rise we decided to take a look into what’s fuelling these hikes.
Premium price to pay
The AA reports that the average comprehensive car insurance policy stands at around £1,000 today, compared to £450 back in 2000.
And that’s not because our roads are getting more dangerous. In fact, we’re having far fewer accidents and, according to the Department for Transport, our roads are safer than they’ve ever been.
When we spoke to some of the biggest car insurers, we were told that the cost of claims makes up the bulk of your premium. More specifically, that fraudulent claims are a big part of the reason insurance has got more expensive. According to the Association of British Insurers (ABI), the cost of fraud to the insurance industry adds around £50 to every premium.
And fraudulent claims aren’t just a result of organised criminal cash-for-crash gangs; there is also a problem with opportunistic fraud where drivers exaggerate the impact of a crash. This is often fuelled by claims management companies which cold-call members of the public in the hope, for example, that they will file a whiplash claim to their insurer (even if they might not have suffered any injury).
The insurance industry is taking action to help curb fraud, with the ABI estimating that the industry spends £200m each year on fighting fraud.
It’s not just fraud that’s whacking up costs here. Customers are also absorbing the costs for insurers’ admin and overheads, as well as the hike in insurance premium tax.
Lightening the load
Fortunately, there are things you can do to reduce your insurance costs.
It’s worth spending some time working your way through our top tips for saving on car insurance – where we explain, for example, why it doesn’t make sense to auto-renew your policy and why it does make sense to ensure you set the right excess.
So, have you noticed your car insurance creeping up in cost over the years?
Our full investigation into car insurance costs appears in the August edition of Which? Money magazine.
Loading ...
