2008 UK car insurance industry watch covers the most important news stories, trends, research, opinion and developments for 2008.
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Uninsured drivers risk having cars crushed
Ministers will this week unveil plans for a new offence of keeping a car uninsured, which will allow police to match insurance industry databases against DVLA records and identify cars which do not appear to be covered.
The British Insurance Brokers’ Association (BIBA) has been lobbying the government to establish the long-awaited Continuous Insurance Enforcement (CIE) process, which would see official vehicle registers and the motor insurance database (MID) join forces to catch uninsured drivers.
A Department for Transport official said that if the number of uninsured drivers was cut by a third it would save insurers £764m over five years which could then be used to keep premiums down.
Ruth Kelly, the Transport Secretary, said she hoped that the proposals would reduce the misery and expense to other motorists. “A small hard core of drivers who refuse to insure their cars push up premiums for responsible motorists and kill or injure thousands of people each year. We’re determined to get these antisocial drivers off our roads. “These tough new powers will leave uninsured drivers with nowhere to hide,” she added.
However critics will argue that the fine proposed under the new system is less than drivers could face if caught on the road and that cross-checking databases will not catch all offenders because its searches uncover whether specific vehicles are insured – they may not be insured for the driver at the wheel.
Around two million cars, or about 6% of those on the road, are thought to be driven uninsured. Research has suggested that these rogue drivers are 10 times more likely than ordinary motorists to be convicted of drink driving, six times more likely to drive a car that is unsafe and four times more likely to be convicted of driving without due care and attention.
They are estimated to kill 160 people and injure 23,000 others every year. Many are driving vehicles that are not taxed or registered, or are themselves disqualified from driving.
Police recover hundreds of ‘cloned cars’ in £6.4m fraud
Insurers are set to recover some of the millions they have paid out on fraudulent claims as the police crack down on a “car cloning” fraud involving stolen vehicles.
Police have so far recovered 640 vehicles, worth £6.4m, which insurers have already paid out for. Insurers can now recoup some of that sum by selling the cars.
The fraud began at the end of 2006 when a large batch of car registration forms destined for the shredder went missing from the Driver and Vehicle Licensing Agency (DVLA). Fraudsters matched stolen vehicles to ones of the same colour and type being driven legitimately.
They filled in the blank documents and changed the licence plates and vehicle identification number of the stolen cars. The scam was so sophisticated that customers buying the stolen vehicles only found out the truth once the DVLA had examined its databases, long after they had paid for the cars.
Detective Sergeant Mark Tidy of the Vehicle Crime Intelligence Service, part of the Association of Chief Police Officers (ACPO), said: “We are looking at a highly organised criminal organisation. Some people are making a lot of money.”
No one has been charged in relation to the incidents yet. “The trouble is, we do not know how many documents are out there. This could go on and on,” said Tidy.
A spokesman for Royal Bank of Scotland Insurance (RBSI) said: “Where we have paid a claim for a stolen car, and that car is recovered, we have procedures in place to enable us to recoup our losses via our salvage network where possible.
“We advise used car purchasers to validate vehicle provenance before they purchase the car. The DVLA can verify ownership for a few pounds.”
Sharia compliant car insurance
Muslim drivers are, for the first time, being offered insurance that obeys the teachings of the Koran. New policies are now being offered to over 1.5 million Muslims residing in the UK by Salaam Halal – Britain’s first independent Islamic insurance group.
Halal insurance – known as takaful – differs from standard British products because the risk is shared between policyholders. Drivers pay into a fund, which is then invested in sharia-compliant ventures and any profits are put back into the fund.
Claims are paid from the pooled sum and any surplus cash is distributed in the form of a discount for the following year’s premium. This is in addition to any conventional no-claims bonus.
Peter Staddon, of the British Insurance Brokers’ Association, agrees that reaction to the cover is broadly positive. He said: “It’s exciting to see a completely new product on the market. “And I think there will be many people – Muslim and non-Muslim – who will want to switch to a company that does not invest in weapons, alcohol or gambling.”
The UK is already considered to be a leading centre for Islamic finance outside the Middle East, but Abdulaziz Hamad Aljomaih, the chairman of Salaam Halal, describes the company as a significant step forward in this financial sector, and while a multi-lingual service is offered from a call centre based in Cheadle, Staffordshire, it’s likely that Sharia-compliant policies are set to become the product of choice for an ever-increasing number of Islamic drivers seeking car insurance in the UK.
RSA maintains UK premium levels
RSA has reported an 11%, or 4% at constant exchange rates, rise in group written premiums to £4.9bn for the third quarter of the year. In the UK, the insurer has maintained net written premiums of £2032m, which is in line with the same period last year (£2025m).
In personal lines, premiums have increased by 1% to £824m and in commercial the insurer has reported premiums of £1208m, which is also in line with last years figure of £1206m.
RSA has achieved 5% rate increases in personal motor and household, and, in commercial, has “pushed rate hard” and achieved rate increases of 4% on liability, 7% on property and 9% on motor.
In its Quarter 3 2008 Interim Management Statement, which was published today, the insurer reveals that retention across the UK stands at 80%.
Andy Haste, group chief executive officer of RSA, commented: “We have maintained good momentum in the first nine months and our premium growth continues to demonstrate the benefits of our management actions and our strong and diversified portfolio.”
“The group’s financial position is strong, reflecting our high quality, low risk investment strategy and resilient capital position. Against a backdrop of challenging trading conditions and volatile investment markets, we continue to exercise tight operational and financial management and remain confident of delivering a strong result in 2008 and beyond.”
Insurancewide ‘disappointed’ by NU’s ‘half-hearted’ website
Norwich Union’s (NU) new initiative offering customers the chance to ‘compare’ NU car insurance quotes with other insurers is ill-conceived”, said James Harrison, CEO of Insurancewide.com.
“The system simply does not work in favour of the customer. The choice of insurers is inadequate in that the customer is only allowed to compare a NU quote with three other providers from a very limited panel.
“If the customer does choose another provider, they are not able, unlike other comparison websites, to actually buy a policy using NU’s site.
“We are disappointed that NU has launched a half-hearted initiative here. It is simply not a valid player in the comparison website market. The customer will not get the satisfaction that Norwich Union has helped them find a better quote. A company proud of its products would be happy to compare itself with the best in the market. NU’s policies do provide excellent cover but, as this initiative shows, they are simply not price competitive and they know it.
“A well-designed comparison website allows the customer to access the entire UK market including specialists for niche insurance needs, not three or four general insurers. It should also allow the customer to enter a precise insurance profile of themselves so that no false assumptions are made and the price they see is the price they get. Insurancewide.com can confidently promise to deliver this service.”
ABI: we will not be complacent but the insurance industry remains strong
The Association of British Insurers (ABI) has insisted that the UK insurance industry remains stronger than during previous times of market turbulance.
Responding to recent reports on the status of UK insurers, Peter Vipond, director of regulation at the ABI said: “The British insurance industry entered the current period of market turbulence in a far stronger position than in 2003. Firms have, for example, changed their business models and now rely far less on equity holdings.
“Above all, working with the Financial Services Authority, firms have introduced a new generation of risk controls, which require them to use realistic numbers for assets and liabilities and stress the actual risks their business will face.
“None of this means the industry is complacent- there have been major falls in key markets- and there is no guarantee that the current market conditions will come to an end soon. These conditions, coupled with the specific challenges of bank recapitalisation, pose real issues.
“But this should not be confused with the underlying strengths of this industry. General insurers will go on providing insurance to people’s homes,cars and businesses that they need; and the life insurers will go on providing savings and pensions as before. Insurers are long term businesses and will protect customers in the difficult times as well as the good ones.”
Coverbox, a new pay-as-you-drive style Motor Insurance
Coverbox, a new pay-as-you-drive style insurance product has named four of its six panel members.
The Co-operative, Allianz Insurance, Equity Red Star and Groupama Insurances make up four of the panel of six, with the remaining two insurers still to be confirmed. Coverbox uses technology provided by automotive security company Cobra. As previously reported in Post, the chairman of Wunelli, the company behind Coverbox, is Sandy Dunn; and managing director is Paul Stacy, previously operations director at BDML.
Coverbox monitors customers’ usage in terms of distance covered and the time of day or night a vehicle is in use, and charges according to mileage covered in off-peak, peak or ‘super-peak’ periods.
Mr Stacy said: “We have confirmed four of the six panel members, but the remaining two places will be filled by insurers that can provide competitive pricing and cover for risks that our existing insurers may not provide. “This means Coverbox will offer a wide underwriting foot-print and be able to provide competitive pay-as-you-drive insurance for virtually every type of driver thereby creating tremendous choice. Consumers will be able to choose insurer by brand or price.”
Allianz goes green – Insurer is the first to offer recycled parts in vehicle repair
Allianz Insurance is the first UK insurer to offer motor policyholders across the country the chance to use recycled parts to repair their vehicles.
Drivers will have the opportunity to reduce their carbon-footprint by having recycled green parts fitted to their vehicles by Allianz’s nationwide network of approved repairers.
The insurer said safety and quality of repair is not compromised as the recycled parts used are not structural, subject to wear or have a safety function such as brake and steering components. The recycled green parts include lamps, radiators and internal door components.
The use of recycled green parts is beneficial to the environment, reducing the amount of waste disposed of in landfill sites. The scheme is also cost effective for both insurer and repairer. For a £1,000 claim, on average up to £240 can be saved by using recycled green parts, the company added.
The decision to push ahead with the scheme follows a successful pilot scheme with a small number of repairers and distributors in Northern England. The initiative has received support from the British Vehicle Salvage Federation (BVSF), which represents the UK vehicle salvage industry.
Highway overhauls EDI car product
Broker-only personal lines insurer, Highway Insurance, has overhauled its screen-driven EDI Choice Private Car product following a major review of its rating structure incorporating feedback from the broker market.
As a result its postcode and vehicle ratings have been updated and introductory bonuses for safe, experienced drivers introduced. The enhanced product also includes cover for child seats to reflect the move towards family vehicles. The new product is effective for new business and renewals from 1st January 2008.
Chris Hill, Highway Managing Director said: “This re-launch is very much part of Highway’s overall strategy and the core aim is to widen our footprint and compete better in the general private car market – particularly super-minis and family oriented cars.”
Hill said the product would not weaken market rates. “The re-launch of Highway Choice Private Car has been timed to coincide with the removal of all concessionary discounts and deals. Our aim is to appear more competitive on brokers’ screens for out target risks, with changes designed to ensure our overall premium strength is not reduced. We will continue to apply rate increases during 2008 to ensure premiums reach realistic levels.”
Direct Line Car Insurance: Vandalism Promise
The company’s vandalism promise
If you make a claim for damage that is a result of vandalism you will not lose your no claim discount.
If you’re a victim of vandalism, the Direct Line vandalism cover comes as standard and now preserves your no claims discount. In addition to repairing the damage; if you go to one of their recommended garages, your car will be cleaned inside and out. Conditions:
• You pay the excess
• The incident is reported to the police and assigned a crime reference number.
• The damage has not been caused by another vehicle
When you claim you will have to pay the excess. Once Direct Line receive your claim, you may lose your no claims discount, but only until the company is supplied with a relevant crime reference number.
Please remember that vandalism should be reported to your local police station unless it is an emergency.
This promise is for comprehensive policyholders only.
Thatcham to open regional training centre
Thatcham has announced plans to open the research centre’s first regional training centre.
Specifically targeting vehicle damage assessment, the new facility, which will be based at the Motor Industry Research Association (MIRA) campus in Nuneaton, Warwickshire, will initially focus on running courses in generic estimating as well as ATA estimating competency testing.
Thatcham’s chief operating officer, Jason Moseley explained: “With the Thatcham / BSI Kitemark scheme now highlighting the need for fully trained and competent technicians, the demands on our training centre are increasing daily”.
“The new training centre will ensure that we can continue to provide the high level of service expected by our customers.”
The opening of the new facility was encouraged by Thatcham’s insurer members who recognise the importance of accurate estimating for both their own engineers and repairers alike.
Motor Claims Management Briefing 2008
Now into its 8th successful year, the Motor Claims Management Briefing will highlight the issues facing the motor claims sector in 2008 and beyond. In this highly competitive market, it is imperative to stop and take stock of where the industry is heading.
Through a combination of key-note speeches, streamed workshops and interactive discussion, the Motor Claims Management Briefing 2008 will address such topics as:
• Is the industry adequately equipped to deal with the problems that could arise from the Ministry of Justice personal injury reforms? Is your company prepared for the fallout?
• Hear expert advice on the latest fraud technologies. How can insurers target fraudsters without compromising customer trust and service?
• Hear from the credit hire companies and bodyshop owners. What do they see as the way to establish mutually beneficial relationships between suppliers and insurers?
• Hear from a leading aggregator about why claims services have been sidelined in favour of price. What can be done to redress this balance?
This is just a selection of the topics that will be covered by this innovative event, designed to bring together those at the heart of the motor claims sector.
Location: Victoria Park Plaza, London.
Jelf seeks rate rise as it launches fleet product
Broker Jelf is keen to continue seeking acquisition targets despite credit crunch. The company has launched a fleet management solutions service which it claims could lead to rates being raised due to good underwriting.
Commercial director Phil Barton said: “Rates are as low as they can be. This is a very price sensitive area.” Based on heavy competition within the fleet market, Barton said companies had consistently made the mistake of focusing too heavily on premium reductions instead of the numerous other ways to cut costs within the business.
Aside from offering an insurance and broking service, SureFleet will provide consultancy advice to give fleet managers ideas on cutting costs while allowing insurers to keep rates at a more profitable level.
SureFleet customers will have access to a linked network of approved repair shops which Jelf claimed would significantly reduce administration costs.
Motor premiums keep rising – Automobile Association
The cost of car insurance in Britain rose 2.4 percent in the last quarter, continuing an upward trend that began in 2006 and pushing average premiums to their highest ever level, the Automobile Association (AA) said.
For the whole of 2007, the average quoted premium for annual comprehensive car insurance rose 5.9 percent, the motorists’ organisation said in a report on its insurance premium index. third party insurance cover also rose 5.9 percent on the year after an increase of 1.5 percent in the last quarter.
“The main driver is personal injury claims which are rising at around 10 per cent per year,” John Close, insurer relations director at the AA, said. “The cost of repairing accident damage is also increasing at about 5 per cent per year, as modern cars are built with greater crumple zones, expensive secondary safety systems such as airbags (and) incorporate ‘exotic’ lightweight materials and thus cost more to repair,” Close said.
Drivers and their passengers are less likely to be killed in a serious accident, he said, but they are more likely to make personal injury claims, with the cost ultimately trickling down into premiums charged.
The AA insurance premiums index is based on average premiums from up to 85 motor and 37 home insurance companies and schemes based on a basket of 1,000 car and 750 home risks.
Buying car insurance online can slash bills
Shopping around for car insurance online could cut your annual bill by more than a quarter, Which? reveals.
Using quotes from Best Buy insurers, Which? Money researchers found a couple aged 45 could spend up to £660 a year buying car and general insurance over the phone. But if they bought insurance from Best Buys online, they could cut this figure by 26% to £491– an annual saving of £169.
And that saving would have been even more if they had switched to a Best Buy from a poorer value product.
Which? Money asked for online and phone car insurance quotes from three Best Buys – Budget, and the Post Office. Car insurance Company Phone Online Online saving:
• Budget (£220 std excess) £267 £254 5%
• Churchill (£150 std excess) £311 £260 16%
• Post Office (£100 std excess) £341 £282 17%
Each was asked to provide cover for a 45- year-old couple with a medium-risk car, living in a low-risk area with a five-year no-claims discount. The biggest online saving was from the Post Office. It quoted a premium of £341 over the phone but only £282 online. And the cheapest online quote (Budget) was 26% cheaper than the most expensive phone quote (Post Office).
Which? Money Editor Martyn Hocking said: “You can clearly save money by shopping around for insurance on the internet. Don’t automatically renew your insurance with the same provider – shop around, as it’s likely you’ll be able to find a cheaper deal elsewhere. Concentrate on getting online quotes for insurance, as these tend to offer the best deals.”
“If you’re using comparison web sites to get quotes, visit two or three and then get separate Direct Line, Churchill and Privilege quotes, as these may not appear on all the comparison sites, to give yourself as many options to compare as possible.”