Three Weeks to save a Few Hundred Quid!

Last week a number of newspapers carried the results of a survey which showed that shopping around for your car insurance three weeks before renewal can save nearly £300 compared to leaving it to the very last minute. I have not tried the experiment myself, but am more than happy to believe it. But what does it actually say about the car insurance marketplace? It’s not great in my opinion.

A couple of years ago, one of the online comparison sites wrote a piece suggesting that just over a third of customers didn’t shop around and “auto renewed”. They also suggested that by not shopping around, customers were collectively paying £1.3 billion more than they needed to. That’s rather a lot. It is also a reason why those of you savvy enough to shop around can get a much better deal. Why? Because, insurance companies factor in this amount to their budgeting plans.

Lets be quite cold about this. An insurance company is a business, its first priority is to deliver profit to its shareholders or owners. To do this it must work in an efficient manner, a significant part of that efficiency is predicting cashflow over the coming years. If they know that a third of their customers will renew without much of a haggle, then they can use this money to sweeten deals for new customers and those threatening to move elsewhere. It kind of takes away the image of highly qualified underwriters working out prices using complex formulas that include age, vehicle, usage etc.

Don’t get me wrong, such underwriters still exist, and revel in their complex formulas, it’s just that the marketing folk are considered more important and will nearly always trump realistic underwriting figures in order to get a sale, or keep a customer.

*warning! A “it wasn’t like it back in my day alert”*

When I first started dealing with car insurance, my company gave me a Rate Book. There was no computers, everything was done manually using figures in the book, which was updated three or four times a year. When I gave a quote, that was it. If the customer had got a cheaper one elsewhere, that was my bad luck. I had lost them, and if I was feeling organised, I would make a note in the diary to have a go again next year. Now I really wouldn’t want to go back to those days. However, I do have a little nostalgia for that period when the premium quoted had a bit of a connection with the actual risk being insured.

Today, I have no doubt that the first figure given is the one most likely to reflect the actual cost to the company of the risk, plus a bit for the shareholders annual golf dinner.  The second and subsequent figures reflect how much can be quoted until the customer says OK. I may be a bit cynical here, but in my world a cynic is just an experienced realist. It has been a few years since I did any quotes myself, but not that long ago, and I still remember insurance companies giving me discretion to discount up to say 20%, but to start a 5% and stop when the customer says yes.

Only last year, I was chatting to a person who worked as a customer adviser in one of the last of the high street brokers. They told me that they had authority at that time to knock off £70 immediately they felt they may be losing the customer. if that didn’t work, then the manager could throw in another £70. After that they could still get on the phone and try and chip away further. “What if the premium starts off at £250” I asked. They laughed and said it would end up at £110!  Great for the customer. Absolutely nuts for running a business. While I still think you have to be a bit barmy to use a high street broker who doesn’t give you actual proper and independently qualified advice, I can honestly see the attraction of taking daft premiums if they are being offered.

If we are being honest with ourselves, we are all a bit lazy. It’s part of being human. And it’s what companies rely on to, putting it bluntly, overcharge. When you take out a car insurance now, it is almost certainly one whereby you have agreed to continue with the insurance automatically at renewal. The selling point of this is that you should never find yourself without insurance, which is actually a very good thing. the bit that isn’t shouted from the insurance company rooftop is that the premium you will be paying is going to be part of the £1.3 billion slush fund that will be used to subsidise your friends, neighbours and colleagues who have been a bit more proactive than you have.

 

Why “Fronting” is Fraud

My Mum was completely against gambling. But she did the football pools for years. My Uncle was someone who fervently believed in buying things when he had saved for them, he was completely against borrowing and looked down his nose at anyone who used credit. He had a mortgage.  Hypocrites? Perhaps they were in the truest sense of the term, but to meet them you would never consider them to be anything but salt-of-the-earth types who conducted their lives in an open and honest way.

Psychologists will probably tell you that such behaviour is rooted in a human need to justify one’s own actions. I don’t know about that as I am not a psychologist. But, as an insurance broker with 30 years experience, I do know I have spoken with an awful lot of salt-of-the-earth-types who conducted their lives in an open and honest way, apart from the fact they were fraudsters. To be more specific, insurance fraudsters who are practicing something called “Fronting”

Fronting is the practice whereby an older, experienced driver falsely insures a vehicle in their own name, but the actual main driver is younger and therefore, in the eyes of the insurer, a higher risk. The reasons for doing it are glaringly obvious with the costs of car insurance for younger drivers commonly being in four figures, any way of getting those costs down are going to be considered. The problem is that the older driver, more often than not doesn’t fully understand that they are committing a criminal offence for which they can find themselves in court and with a criminal record.

One of the most common situations is when a parent, after seeing the eye watering premiums required for their son or daughter to insure a vehicle in their own name, has a tinker on the price comparison site and finds a much more acceptable figure if they take out the insurance themselves and add the youngster as a named driver. The fact that the child is going to be the main driver, and may even live miles away is self justified by the fact that money has been saved and it is just a way of “playing the system”. I have been told on many occasions that “everybody does it” and “insurance companies expect you to do it and they factor it in on everybody’s premiums” They don’t, and I don’t think they do.

In most of the cases I have come across, the perpetrators of Fronting are well meaning and decent people. The idea that they are criminals and could end up with a criminal record would be totally humiliating to them. But, that is exactly the risk they are taking, and a defence of “I didn’t know it was wrong” won’t effect the outcome of the court case.

In reality,  the chances of being found out remain quite low until there is a claim involving the younger person. It is highly likely that any accident involving the younger named driver will be looked into more thoroughly than if it involved the older one. If the accident occurs in a different area than the one you live in, such as the university town where your son or daughter is living, or you have failed to disclose their address to the insurer, then alarm bells will be ringing in the claims department of the insurance company – and the consequences of being found out are dire.

If getting a criminal conviction, being fined and probably having it reported in the local press isn’t enough. The actual insurance consequences, both initially and long term, are pretty grim as well. Firstly, the insurer is within its rights to decline to pay out on the claim. If the accident involved a third party, and especially a third party injury, this could be very expensive as although the insurer would meet those costs, they could then attempt to recover them from you.

The insurer could choose to cancel the policy, leaving your child without insurance. This could lead to further legal problems as they would then be deemed to have been driving without insurance which is also an offense that can lead to fine, points on their licence and possibly a driving ban. It goes without saying that any thoughts of trying to save any money on future car insurance will go straight out of the window as you will both struggle even to find an insurer, let alone one that will give you the kind of competitive premiums you were used to.

Away from the car insurance problems that you will face for many years, the knock on effect of having a conviction for fraud will crop up in many aspects of your life; including your job, getting a mortgage or any type of credit and even your health as the whole stress of the situation will take its toll on you.

Fronting, however well intentioned, is obviously a bad idea, but how do you know if you are doing it? Like I said, most people who get tangled up in this mess do so without malevolent intent. To be fair, it is not always clear who is the main driver, especially if a number of people use the vehicle. As a rule of thumb, if you use the car for commuting, or just use it every or most days then you should be put down as the main driver. If you are in any doubt, be straight with the insurer, tell them everything you think they might what to know about you, the named drivers and the vehicle. It will save you money and a whole lot more in the long term, and possibly in the short term if you’re son or daughter is unlucky enough to have an accident.

 

 

 

 

 

 

 

 

 

 

Car Insurance Costs to Soar! Maybe. More Likely Maybe Not!

A fairly uninteresting formula used to calculate personal injury compensation has suddenly become a very interesting formula used to calculate personal injury compensation. This is because the government has noticed that the returns on investments are low. Fingers on the pulse as usual given that the last time this formula was altered was 2001, so why now? Returns on Index Linked Gilts have not been great for a long time, yet the 2.5% used in this formula has been a constant for over 15 years!

The formula is important as it fixes the amount of compensation from an insurance company to a personal injury claimant who is deemed to need the money in order to ease their wellbeing following life changing injuries. It is used to calculate the lump sum amount required to meet the claimants ongoing needs, while taking into account the expected investment return on that lump sum. Since 2001 this figure has been 2.5%, it is now minus (yes, minus!) 0.75%. It is in effect stating that to get what is needed from that lump sum, it has now got to be large enough to withstand an annual drop in value of 0.75%

In one of the few articles I have read that gives some actually thought out figures, the Solicitors Journal  states:

‘For someone in their twenties, lump sum damages would change from £4.8m to £11m. For someone in their sixties, where it impacts less, lump sum damages would change from £3.8m to £6.5m.’

And here I start to feel deflated and reach for yet another calming dose of Earl Grey. With the best will in the world, I think the good folks at the Solicitors Journal would accept that they do not enjoy the mass readership of the great general public. Neither does the many specialist publications who have covered this in a bit of informed detail. A very necessary bit of informed detail. Instead, the mainstream press goes straight to the eye catching “Car Insurance to rise by £300” headlines which are advertiser friendly and get people who are expert at reading these headlines much ego massaging time on the radio.

Yesterday, I was accosted by an acquaintance who’s knowledge of finance and insurance extends to the fact that he has a mortgage and three children, no life insurance but a great deal on his iphone cover, and was told that his nephew is now going to have to pay £1000 more for his car insurance because “The government have put car insurance up for the under 25’s”. Despite my best efforts, he is sticking to his dystopian view because “that guy on the radio said it”

Do the mass media really get off on scaring people?

I have read the “£1000 increase” for under 22’s in many places, along with “£400 increases” for older drivers and “£75 – £100” increases for the inbetweenies. Not once have I seen anything that tells me how the dickens these figures are derived. The ancient art of plucking figures from the air is in vogue yet again. Fact is that car insurance premiums are calculated in many ways. The figure you end up with on your renewal depends on where you live, your age, your job, the car, your own driving history and even the fact that the underwriter has been told that he must get in x amount of policies so “be friendly on the discounts this week.”

The art of acquiring financial figures to be used in newspaper headlines is ancient and has to be passed down from master to student…

 

The most recent things I have read about this change is that the government want to have meetings with the insurance industry to see if there is a “way forward”. I strongly suspect that such a “way forward” was considered long before this change was announced. If you want to dump an idea, first change it for the worse then wait for those effected to come up with their own “not quite as worse, but worserer than they would have originally demanded” plan.

The idea that someone in receipt of a large sum of money is going to use it in a way that reflects the government’s view regarding the investment of said money, and therefore the formula used to calculate it is so far from reality that it is laughable. The fact that it has been looked at now seems to me that it is more likely that they will ditch the whole idea on which this calculation is made and come up with a whole new way of dealing with this situation.

And as for car insurance premiums, I wouldn’t put my kidney on ebay just yet. Natural market forces, along with a whole lot of other things, will temper things down to just expensive rather than impossibly expensive.

Fees and How to Avoid Them

Why am I being charged a fee?

The answer is simple, it is because the company charging it either cannot survive without charging it, or the company charging it knows it can get away with it… in the majority of cases anyway.

How is the Fee Calculated?

In several ways. Insurance is highly competitive so one thing a company looks at is the fees that its competitors are charging. If it is working for them, then its’s about right. Next, they will look at their own costs. This varies whether you are dealing direct with an insurance company, or using an intermediary such as a broker or online comparison company.

If you are using a broker that has given you a service such as professional advice, then you would expect a fee would go toward the the cost of running an office, training and regulatory costs. If you are not getting advice, either going online or direct, then your attitude toward the fee would, I suspect be very different.

The Gift that Keeps Giving!

While, in a lot of cases, an appropriate fee can be justified at the commencement of a policy, the ongoing fees that are levied are a lot more difficult to defend.

It is crucial that you keep your insurance provider up to date with changes in your circumstances. If you do not, then your cover is very much at risk. However, one off charges of up to £50 for changing your address or adding (or taking off) a named driver from your policy are, frankly, outrageous.

There is no doubt that the competitive nature of the cost of insurance means that companies do what they can to show a premium as low as they can get it. There is an argument that says this in itself is a huge problem because it may also be that the low premium is because the cover given is not that great. That’s a discussion for another day. With regards to fees and admin charges, they help to boost the income of the insurance provider whilst allowing them to appear to give good value premiums.

What Can I Do About It?

Insurance providers love people that are lazy. People that don’t bother to shop around at renewal, people who just let their direct debit chug along without checking the amount going out, and definitely people who do not question what they are up to. If you see an admin fee on your new quote, or on your renewal, the first thing to ask yourself is do you think it is reasonable? As I said before, there is a genuine case for reasonable admin fees. If however you do not think it is, then talk to them. They may convince you that it is justified, or, you may convince them to reduce it or get rid of it altogether!

Fees that are charged for changes to your policy are a little more tricky to deal with. To get the best result here you need to have looked at the terms and conditions of the policy at outset. You would at least be aware of the costs involved before you make changes. It is still the case though that you can contact your provider and see if the charges can be cancelled. You won’t be lucky every time, but in my experience the chances are about 50/50. Don’t forget that you can switch providers during the term of your policy. You need to be careful here as there are repercussions regarding the allocation of  No Claims Discount, especially on motor policies, but if this is not an issue then you should be able to switch providers quite easily in order to get a better deal following something like a change of address.

 

Should Social Media profiling be used to determine Insurance Premiums?

Facebook Prevents Insurer from using Posts to influence Premiums

Today was supposed to be the launch of a pilot scheme by the insurer, Admiral, whereby they would ask to view the potential insured’s Facebook posts and then make a judgement as to the lifestyle and behaviour of the person and then offer a premium that was influenced by their judgement of that person.

Admiral had stated that it would analyse the accounts of first-time car owners, including what they were posting and things that they had “liked”. From this they would then build up a profile and determine whether they were likely to be safe drivers and offer discounts as a result.

Facebook has, at the last moment, pulled the plug on this. Probably because it realised that it could be embroiled in the considerable number of disputes and complaints that was sure to follow from such a subjective idea.

There are so many reasons why this crazy plan should not have got even this far. However, it does highlight the lengths insurers are prepared to go to in order to gain an edge in a market. Even if that market is as notoriously difficult to turn a profit from as young drivers.

My suspicion, having been around insurance companies for a while, is that some senior executives who wanted to appear hip, have ill advisedly listened to some trendy junior executives who have told them that the future is all about social media. In order to appear to be “on trend”, like your bachelor uncle who wants to take you to a Drake gig, said senior executives suspended their experience and, more importantly, common sense and ran with the idea.

While the pitfalls of this nonsense are pretty much self evident. It does invite closer thought. Long before social media was even a term, I was broking motor insurance. At that time, potential clients would either phone or drop in and complete a form from which a premium was calculated. But even then then problems would arise. It wasn’t common, but then again not that unusual for someone in the office to declare that they had some knowledge of the potential client that had not been declared. I have been told on more than one occasion that someone was not declaring their address properly, or not mentioning their part time evening job, in order to get a cheaper premium. How did they know? They lived next door to the person and knew they had moved months ago or saw them going to work every night!

Realistically speaking what actually is the difference between an insurer finding out “relevant” information from a third party as happened years ago and finding out such information from social media?

The point is that social media provides the type of information that all businesses will give their right arm for and whereas most people will resist attempts to give information if they think it will be used for marketing, most will be happy to volunteer such information, and a lot more, in a social media post.

Probably all young people are warned that potential  employers are likely to look at their social media profiles prior to being interviewed, and the more savvy ones will moderate what they post and who they let see it. The next level will be the use of social media profiling for commercial purposes, there is a good argument for saying that it is already here.

Perhaps Admiral’s biggest mistake was not trying to exploit social media, but just being too up front and honest about it. Even more of a mistake is the kind of information people are just thoughtlessly putting online for the world to see.

 

Further details of this news story can be found by clicking here and more information about car insurance and the use of Black Boxes here 

How to Complain Effectively to Your Insurance Company

Why Complain?

For every complaint an insurance company receives, a lot more potential complaints are not made either through apathy, lack of confidence in the process or just “not getting around to it.”

Insurance companies are big beasts and as such they are inevitably going to get things wrong. I always believed that a true mark of a company was not so much what it had done to generate a complaint, but how it dealt with the complaint and the effort it made to impress a dissatisfied client.

There is little point in telling all your friends and family how bad your experience has been, without telling the company direct. It may seem hard to believe, but without customer feedback the people running the company may never get to be aware just how lousy their systems or service are and therefore never get the chance to improve things.

Obviously your desire to complain is not fueled entirely by altruism, and is instead centred on your desire to be adequately recompensed for whatever mess occurred. This can take the form of financial compensation, putting the administration right or just an acknowledgement of the problem with an apology.

It doesn’t matter why you are complaining or what it is about, the strategy you should use is the same:

  1. Keep it to the point

  2. Keep it polite

  3. Keep it going until you are satisfied

Keep It To The Point

Don’t ramble, repeat or go off on tangents.

When making a complaint, always do it in writing. The only reason for using the phone is to get a name and/or an address to write to. This information should be on policy documents and the company website anyway so I’m even doubtful about using the phone for this purpose!

Before writing the letter, make some notes on what the most important part(s) of your complaint are. These should include:

  • A brief outline of what has happened
  • Your name and policy number
  • Relevant dates
  • Any names you have had contact with and when
  • Details of any promises made to you, when and by whom
  • What you want to put things right
  • An accurate statement of costs you may have incurred
  • oh yeah…put the word “COMPLAINT” clearly at the top of your letter

This list is not exhaustive as each case is different, but these are the main points the company will be looking for.

Once you have made your notes, put them in a logical order and write your letter, use bullet points if you are happy to do so. They are short, punchy and easy to refer back to.

Don’t go on and on about how you feel, or the effect it has had on you and the world in general. If you are upset or annoyed then say it. But just the once. Don’t write paragraphs about how you have a nephew working in insurance and therefore you know all about the product/company/micro fiscal policy etc.. It has no relevance and can possibly slow the process down

Keep It Polite

Never. I mean never, use language you mum would be upset at. Never make it personal, and never threaten (unless it is just pointing out you can take the matter to the ombudsman. Which they really should know already!)

Keep it Going…

Although it is a bit shoddy, some companies may use a standard reply to your first approach. You may feel it is a tad woolly and doesn’t address address your concerns properly. Don’t give up! Take the time to write again, reiterating your points and highlighting where you think they have failed to address them.

Follow the Process

It might be a pain, but if you follow a prescribed process, it will speed things up – eventually! All companies have set complaints procedures and required time limits to do certain things. If a step is missed, it is like playing snakes and ladders and you will be taken back a few places in order to tick the required box.

If there was one “tip” that is more important than any other it is…

Keep a copy of everything…You WILL need it!

Still Not Happy?

You must give your provider the opportunity to resolve your issue. Sometimes though, this just doesn’t happen. If you get to the point where the company flatly rejects your complaint, you can then go to the Financial Ombudsman Service. Do not go to them any earlier, if you do, they will just refer you back to your company as it will be seen as still being a dispute with them.

The Financial Ombudsman Service is independent and free to use. They have a great website http://www.financial-ombudsman.org.uk/consumer/complaints.htm which is simply laid out and easy to follow. The biggest downside is that they receive about 5000 enquiries a day so their workload is large. Be prepared to wait several months for the matter to be concluded.

 

 

Gap Insurance Explained

Just what is Gap insurance?

It’s Guaranteed Asset Protection insurance. There you go…clear, simple and easy eh?

No.

It’s a bit more complicated than that. I know, unusual for an insurance product but what can I say…

Although there are some variations, in the main, Gap insurance seeks to fill the shortfall that may occur between the value of your car and the amount you may receive from an insurance company if your car is written off.

“What shortfall” I hear you cry…

It’s a fair question. It is a common belief that when you take out car insurance the question about “How much is the vehicle worth” has a bearing on how much you are likely to be paid if your car is written off. Invariably, this is not the case and it is more likely that the value you give will have more influence on the premium charged than the amount that you will get after a major accident. (Do not, however, fabricate the value of your vehicle in order to get a lower premium, this is a very bad thing to do and may invalidate the insurance and even lead to proceedings for fraud!)

If your car is written off, in the vast majority of cases, you will be offered the “market value” of the vehicle. This can be a contentious figure, and if you find yourself in this position, you should never be shy in questioning the insurer as to how they reached their offer and to argue your point if you believe you have a fair one.

The shortfall typically arises, particularly with a new car, when a write off occurs relatively soon after buying the car. I think we all understand that the value of a car declines at its steepest as we drive it, shiny and new, off the forecourt. The “market value” can easily be several thousand pounds less than the price paid new. Gap insurance is designed to dovetail with your comprehensive insurance cover so that the overall payout you receive from both added together is more akin with what you believe will be the replacement cost of the vehicle.

What are the variations of Gap insurance?

Broadly speaking, the different variations of Gap insurance all aim to put you back into the financial position you were before your claim. However, because there are different ways of buying a car, variations have evolved to meet specific needs. Here are the main ones:

 

What are the different types of Gap insurance?

The Gap insurance market can be complex, with different providers offering their own unique products. Some of the most common policies are listed below.

“Return to invoice” Gap insurance

This is straightforward. The Gap insurance will pay an amount that will top up the main insurance payout to the amount that you bought your car for. Unsurprisingly, they will ask for a copy of the invoice.

“Return to value” Gap insurance

Similar to “Return to invoice” but instead of topping up to the amount you paid, “Return to value” will top up to the value of the car at the point of purchase. This can be of benefit if you have had the car a while, but moreso if you bought the car second hand.

“Finance” Gap insurance

This is probably the most basic and common forms of Gap insurance. It aims to help you clear any loans, finance or associated costs in the event of a claim.

“Lease” Gap insurance

If the car is leased and written off, this type of gap insurance is designed to help you pay the remainder of your contract and any early closure fees that may be applied for ending the arrangement early.

“Vehicle replacement” Gap insurance

Instead of paying an amount that will help you get to the figure you originally paid for your car, this is designed to bridge the gap between the main insurance payout and the cost of buying a new car. A lot of dealerships offer this type of product and include cover bor borrowing as well.

 

Should I take out Gap insurance?

As with all insurances, it is down to you to decide whether the cost of the cover and benefits offered are worth what you are being asked to pay for it. The chances are that you will be offered some type of Gap insurance when you buy your car. The best idea, as always, is to read the details of what you are being sold and then shop around to see what is available from the rest of the market.

Gap insurance is something to think about whilst not having an accident
Gap insurance is something to think about whilst not having an accident

Just What Is An Excess?

So Just What Is This “Excess” All About…

Simply put, if your claim is £1000 and you have a £100 excess, then you will receive a payment of £900. If I could leave it at that, this would be a very short post, so lets move on to the “not quite so simply put, but really important you should know” bit

A Tale of Two Parts

The excess on your policy, and it can be any type of policy, is important in two ways. Firstly it effects the premium you pay. All policies will come with a standard (or compulsory) excess that the insurance company feels is appropriate to that particular policy.

From the insurers point of view, the excess acts as a deterrent for small claims and as a way of having another string to their bow when trying to make their premiums more competitive. Typically, on a house insurance policy, the excess may well be around the £100 mark. However, in many cases you may have the opportunity to vary that and choose to have a larger excess in return for a lower premium. 

You need to be careful here, because there are couple of ways this can be done. The easiest is by just varying the excess. The £100 excess becomes a £200 excess and in the event of a £1000 claim you will now get £800. The “are they being a bit sneaky” way, is to take advantage of an insurers option to have a “voluntary” excess. In this scenario, you will be asked if you want a “voluntary” excess and if so how much. You have decided you are happy to have a £200 excess, so tick the “£200” box. What you have actually done is agree to a £200 excess IN ADDITION to the standard £100 excess. Your £1000 claim is now minus both the standard and voluntary excess and you are now looking at receiving £700. Fine if you are aware of that from outset, a little less fine if it comes as a surprise.

The second way an excess influences you policy is more subtle. lets stick with the standard excess of £100 on a contents policy, but instead of a £1000 claim, it is much lower. In theory, you can make a claim of £101 with a £100 excess and get a cheque for £1. I’m taking a guess here that nearly all of you would think submitting a claim that would give you £1 probably isn’t worth it. But where would your cut off point be? You may feel a claim for £140 less £100 is worth it, but a claim of £135 less £100 isn’t. There is no right or wrong here, it is entirely down to how you feel about it. What is true is that the vast majority of people do not make claims that would get them a payment, but, for many reasons, they don’t bother. This is why I say that the amount of an excess on a policy has a real influence on whether you even bother to claim or not.

I Bet You Don’t Have an Excess on Your Policy Anyway…

Hang on a minute, didn’t I previously just write about what the typical excess was on a policy? Yes I did and I am now being a little pedantic. we all refer to the excess being on the policy, it is the way we all talk.

However, in truth, in the majority of cases an excess is applied TO EACH SECTION OF THE POLICY.

Let me give an example, your home is insured and the building is correctly covered for £250k and the contents for £50k. You have a small fire which results in minor damage to the building which will cost £2000 to repair and you lose some possessions which will cost £500 to replace. You believe you have a £200 excess, and you are correct. However, you didn’t know that the excess would be applied to both the Buildings section and the Contents section. This results in your total claim being £2500 minus two lots of £200 and not just the one lot of £200 you were expecting.

In order to avoid this type of misunderstanding, you must read the policy documents and ask questions before any problems occur. It is easy then to make sure you have the cover that you want with the conditions you understand and accept.

My Excess is Higher Than the Value of My Car!?

Yes that can and does happen. Especially to young drivers who can often find that they are subject to an additional compulsory excess on top of the standard compulsory excess. I have seen people under 21, have policies with a compulsory £250 excess plus an additional compulsory “young driver” excess of £400. If they have just spent £600 on their first car, then the slightest knock will write the car off and leave them with nothing.

It really does seem unfair, however it needs to be understood that the value of the car is only a part of what the insurance covers. A 15 year old vauxhall corsa worth £300 can still do a lot of damage to a brand new BMW in an accident. If injuries are involved then the payout can be sky high.

Why is the Excess £1000 or More for Subsidence Claims?

If you have buildings insurance you will see that the excess for claims of subsidence is £1000 or more. Subsidence is when structural damage occurs to your property due to ground movement, often leading to major remedial work having to be undertaken. Claims of this type can run into tens of thousands of pounds and can involve you moving out while the work is done. The much greater excess that is put on subsidence claims reflect the much higher claim value that is inevitable. Although it seems a lot, if you were unlucky enough to have such a claim you would probably feel that £1000 is a small price to pay for such a disastrous event.

Urban Myth…

There is a widespread belief that making a claim will inevitably lead to the premium being increased at the next renewal. While it is almost certainly the case following a car insurance claim where the No Claims discount has not been protected, it is not always the case for home or business insurance.

It’s not the Making of the Claim…

While it is quite legitimate to weigh up whether it is economically worthwhile making a claim or not, please remember that the questions on the insurance application form ask whether you have experienced any incident that could have given cause for a claim. If you do not tell your insurer of any incident for which you could have claimed, then the insurer is within its rights to decline any subsequent claim or just refuse cover.

In Conclusion…

As always, read the terms and conditions of your policy and especially the insurance schedule which will set out the amount of excess for each section.

When getting a quote, play around with different levels of excess that you could comfortably afford in the event of a claim and see what difference it makes to the premium.

 

 

 

 

 

 

 

 

 

Car Insurance for Young Drivers

Swapping your Mum for a Car Insurance Black Box

As young drivers, you have probably experienced the shock of finding out the cost of your first car insurance. Then, having passed your test, you will experience the cost of that insurance going up. This comes as a surprise to a lot of people. However, there is a logic in play here. When you are learning, you are under supervision. Someone is with you and your focus is learning to do things right and practice for a test. Once that is behind you, you’re free! On your own, or even with a bunch of friends the same age in the car with you. Its no longer your mum giving you sensible advice, it might be your your annoying younger brother instead. One way to possibly help with cost is to swap your mum for a car insurance black box. It’s a form of “supervision”, but without the constant er…shall we say…”advice”.

What is a “Car Insurance Black Box”?

It can also be known as “Telematics” or “Pay as You Go Car Insurance” by some companies. Keeping with the insurance industry’s exciting and innovative way of naming their products, this gets its name from the fact that the small device is both box shape and usually black. It is about the size of a smartphone and its job is to send information back to the insurer about your driving.

Myths and Bunkum

There are a lot of urban myths about these devices, some are complete bunkum, others are kind of based in a sort of truth which has been through a politicians speech edit. Here’s some examples:
  • The Insurance Company will automatically inform the Police if you are Speeding

Bunkum. Don’t get me wrong, you shouldn’t speed, it is illegal, dangerous and wears your tyres and brakes out faster, so trying to save money on insurance while at the same time regularly speeding, makes you a bit of a twit. If you are involved in an incident and the police are interested, they can request information obtained through the black box, and use it either to help you, or prosecute you, depending on what it shows.

  • Having a Black Box fitted will Void the Cars Warranty.

    Bunkum. Nothing really to add here. Just Bunkum.

  • The Insurance Company will use the Information to prove you were to Blame for an Accident

    Maybe. If an accident was your fault, the information may help to prove it. On the other hand, it can just as easily do the opposite. If you say you were hit while stationery, the Black Box may well be your best friend.

  • The Black Box will Interfere with my Sat Nav or Car Radio

Not at all likely. Fitted properly, a Black Box is extremely unlikely to interfere with any other electric devices in the vehicle.

  • My Insurer will not Cover me if I Drive outside of Certain Times

Mostly Bunkum. Some insurers will insist that you drive only at certain times, during the day for instance. You may have put a restriction on yourself in order to keep costs down and you, in all good faith, had every intention of keeping to those restrictions. However, things can change. You may get a call from someone asking you to take them to hospital during the night. Or you may have been out for the day and the traffic is so bad on the way back it takes hours longer than you anticipated and into your “curfew”. No decent insurer is going to question this. Where they get rightfully interested is when the information being sent back to them via the Black Box shows a constant disregard for the restrictions in place. In that situation, its time to review the restrictions.

  • It Costs to Have a Black Box Fitted

Sort of True – sometimes. The fact is that a few providers will make a charge for fitting the device, many do not. Like all insurance policies there can also be admin charges for any changes to your policy during the term and a charge for the removal of the device is not uncommon. I may have mentioned this before….READ THE TERMS AND CONDITIONS FIRST!

What Information Does it Send Back?

The purpose of the box is to build up a profile of your driving style. The information it can send back may include:

  • Speed

  • Acceleration

  • Location

  • Distance Travelled

  • Time of Day

  • Cornering

  • Braking

  • Types of road usually used

  • Length of time driving

It is easy to become a little paranoid about what could be described as a “Big Brother” system where all your movements are constantly monitored. It certainly is not for everyone, and that’s fine, but if you are comfortable with the idea it can save you money. Remember, the insurance company is building up a profile of your driving style in order to assess you in terms of risk. If you suddenly have to brake hard in an emergency, you shouldn’t be worrying about whether you are going to be penalised by the insurance company. They honestly do not care two figs if you occasionally brake late, speed or once in a while drive for four hours without a break (though its really not a good idea is it?)

Who is it Good For?

It is mainly promoted for newly qualified or young drivers. There is no getting away from the fact that this group has statistically more accidents than any other. If you are in this group, then your insurance is based on the statistics amassed from everybody in the same group. Using a Black Box is a way of personalising your insurance to just your style of driving, and may potentially save you money.

Everyone can in fact use this method for their insurance, though far fewer experienced people with full protected no claims bonus use them. Other groups that may find it worth looking into include:

  • Drivers that do very low mileage

  • Newly UK resident drivers

  • Drivers with convictions

  • Drivers with a poor claims history

 

Can I See the Information that is being Collected?

Most insurers give you website access to your account and you can see all the information that is being collected about you. You can see how your driving style affects your profile and then adjust the way you drive in order to make improvements, and possible reduce the insurance cost.

What are the Drawabacks?

The main one, and most uncomfortable, is that you may not be as good as driver as you thought you were! It is entirely possible that your particular driving style is not one the insurer likes and the whole exercise could end up costing you more. You could turn this into a positive though and use the evidence to have a bit of a think about improving your driving habits.

Another is that you may have underestimated the amount of miles you drive and the cost of insurance will increase as the true number of miles you drive becomes apparent. Like going over your limit on your mobile phone though, the insurer should keep you informed as to whether you are getting close to the mileage you gave them.

If it turns out that you are actually driving at peak times on busy roads, when you originally told the insurer something different, then you could find the cost of your insurance increasing.

Although the principles are pretty much the same with all providers, there are some subtle variations so if this is something that may interest you, then be sure to find out all the details before applying. One last thing, having a Black Box fitted means that if the car is stolen, it will be easy to track and find!