Motorists are seeing a third wave of costs battering their finances - here's why
a massive 61 per cent, according to pricing experts Consumer Intelligence, from £900 to £1,449. For those in higher risk categories, such as the young and the elderly, these increases have pushed premiums in some cases to well over £3,000.
But there are other less obvious factors at play here too. Firstly, new regulations introduced last year – which ban insurers from charging existing customers more than new ones – have put the squeeze on insurers’ profits. This has – in my view – been a direct result of the ban on offering different prices to new and existing customers. In the old days, insurers made much of their margin by overcharging their inert loyal customers – while staying competitive on new business rates for the switchers.Today, however, that’s not allowed. So when customers call up and ask their insurer to sharpen their quote, they’re instead offered a saving by downgrading to a different sub-brand.
There is also no commonality between the basic, standard and premier levels of cover that most insurers offer. Axa’s basic policy, for example, does still cover windscreens. But it doesn’t offer any cover for lost or stolen car keys – or provide any courtesy car if yours is in the garage after an accident – two things that Hastings Essential does offer.
As for prices, we need to deal with the fact that more and more people are finding themselves unable to afford insurance at all. Indeed, it’s often the poorest customers who are quoted the highest prices. This might well be because they live in higher risk areas – but surely this is where pooling of risk should be working a bit harder. Alternatively, perhaps it is time to look at social tariffs for the sector – or an exemption from insurance premium tax for low-income customers.
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