Car Insurance Companies Criticised over Rising Premiums
Figures published this week claim to show that car insurance providers in the UK have made £7 billion over the past half decade.
This windfall is largely as a result of the fact that while premium prices have increased, the amount that insurers pay out to those making claims has fallen in the same period.
The report provides an intriguing look at a complex and often confusing industry. And yet car owners are urged to keep abreast of developments in the world of insurance, since shifts often have a significant financial impact on millions of motorists nationwide.
Between 2010 and 2014 the study notes that insurance premiums have actually decreased, meaning that the total expenditure on cover annually is lower. However, the cumulative impact of premiums rising incrementally has seen drivers charged an extra £353 million over the same period, with insurers subsequently saving more money by simply not paying out in the event of claims with as much regularity as in the past.
The number of claims which were paid by insurers dropped by almost a third, which analysts point out does not tally with the four per cent reduction in the total proportion of claims being made by motorists.
Report spokesperson Tom Jones said that motorists are being hit on two fronts: they are facing the prospect of higher insurance premiums and lower rates of pay-outs being made. He also argued that while it is clear that insurers have managed to make significant savings in recent years, they have failed to make these benefits felt by lowering costs for customers.
These significant accusations prompted a response from the Association of British Insurers (ABI), which claimed that its own analysis of the market has revealed that as a whole there has not been a profit made from underwriting for over 22 years.
Furthermore, it claims that motorists have benefited from £1 billion in savings because of heightened efforts made by the government to tackle the legal costs that are usually associated with claims relating to cars.
ABI spokesperson James Dalton said that insurers always strive to deliver the best possible offers to customers, contradicting the assertions made by Thompsons Solicitors, according to Auto Express.
In 2010 there were a total of just under 791,000 insurance claims relating to cars made in the UK. This level rose in 2011 before falling consistently in the ensuing years and eventually hitting almost 762,000 in 2014.
Irrespective of the number of claims made, the report from Thompsons shows that the cost of the claims has decreased steadily over this period, from a peak of £8.3 billion in 2010 to just £5.9 billion in 2014, which represents a 29 per cent drop.
The ABI’s response to the report also made mention of the fact that there are a number of changes being made to the car insurance market at the moment which will alter the ability of motorists to make claims and also change the amount of compensation that can be sought for particular scenarios.
As well as the likelihood that drivers making claims for minor injuries will no longer be able to receive a cash payout, personal injury cases taken to the small-claims court will be subjected to a new upper limit for compensation of just £5000 if government plans are put into action.
Motorists do at least have more ways to compare insurance costs than ever before thanks to online tools, with the same benefits being felt when it comes to car finance deals and other offers in this sector. But the idea that insurers are making more money while paying out on fewer claims will no doubt be seen as problematic by customers who have to spend hundreds of pounds a year on cover by law.