The Amateur Financier

(It’s time for yet another guest post, sharing some valuable information about the world and your money.  This week, I have the pleasure of sharing a few hints about car insurance (and who knows, perhaps learning a thing or two myself.  Read, enjoy, and hopefully, save some money along the way.)
Renewing a car insurance policy is something nobody looks forward to. The reminder letter that comes through the post rarely holds good news about the new cost of your insurance and in recent years motor insurance prices have skyrocketed. To make sure you’re well equipped to spend wisely on your car insurance, it’s important to inform yourself as much as possible about where your money is going and why.

A vital consideration to keep in mind right now is that the car insurance industry is currently suffering at the hands of injury lawyers. People involved in car accidents are being actively pursued by firms offering ‘no-win, no-fee’ claims against other parties involved in an accident and the ensuing costs of these claims are being borne by insurance companies, who are having to make back these costs by hiking up their premiums.

Image courtesy of matrianklw

The moneysupermarket car insurance comparison website offers drivers information on how to find the cheapest quotes. The site’s car insurance expert Steve Sweeney highlighted personal injury claims as the biggest issue in the industry right now.

He said: “In our view, the biggest single factor driving price increases is the burgeoning cost of bodily injury claims.

“We estimate that twenty years ago bodily injury claims accounted for around 20 per cent of UK motor insurance claims costs. In 2010 we now estimate that proportion to be 50 per cent.”

He added: “Our research shows that car insurance premiums have increased year-on-year by a massive 31 per cent and this is set to continue to rise.

“Factors that are causing this include an increase in personal injury claims, fraud and the continued problem of uninsured drivers which are pushing up premium prices. In fact, we carried out some research in August last year which found that 15 per cent of motorists under the age of 35 would consider staging a motor accident to claim on their insurance.

“Organised motor fraud not only costs the insurance industry, but risks the safety of innocent drivers, passengers and pedestrians. In addition, fraudulent claims cause insurers to increase premiums for honest motorists as they try to recuperate their losses, making it even harder for cash-strapped motorists to keep their cars on the road.”

Another crucial factor in the current pricing of motor insurance policies is speeding. Any drivers convicted of speeding could see the cost of their premiums rise by 54 per cent.

Research by MoneySupermarket.com found that a driver with a speeding conviction and six points on their license could pay 19 per cent more on average than someone with a clean license. If you pick up another three points to take your tally to nine, you could pay as much as 54 per cent more for your car insurance than someone who has no points on their licence.

Those who repeatedly flout speed laws will find themselves bearing the brunt of even heftier increases in premiums, with a staggering 54 per cent potential increase for those with 9 points on their license.

Peter Harrison, car insurance expert at moneysupermarket.com said: “Insurers clearly take a dim view on policy holders who speed and this is reflected in higher car insurance prices. Even going just above the speed limit can add huge additional costs to your car insurance, and for repeat offenders, some insurers may even refuse to cover you, so motorists should take extra care to ensure they stick to the speed restrictions.

“We have witnessed sharp increases to the cost of car insurance premiums recently. moneysupermarket.com research found premiums rose by 44 pence per day in 2010 on average2, and this trend is set to continue, especially with the recent ECJ ruling on the legality of using gender to calculate insurance premiums. Not only are motorists who flout the law by speeding risking the lives of other road users and pedestrians as well as their own, they also run the risk of adding to the existing headache of sky high car insurance premiums.

“My advice to motorists concerned by the cost of their car insurance is to always scour the market for the best deal for your circumstances.”

Moneysupermarket offers drivers the following advice on how to keep insurance premiums to a minimum:

• Use online resources to scour a broad range of insurance companies and products, rather than settling for the first quote you are given.
• Avoid paying interest on your premium by paying for it in a lump sum at the start of your policy.
• Downscale your car to a model with a smaller engine in order to take advantage of the preferential insurance rates smaller cars receive.
• Lower your mileage, as insurance companies take this into account when calculating your premium.
• Improve the security of your vehicle by installing an alarm and immobiliser.