UK Car Insurance Industry Watch, April 2007

This regularly updated section of the HomeApproved web site will run in parallel with our latest news, information and special offers section. Industry Watch will specifically cover the latest trends, research, opinion and developments in the UK car insurance sector.

Implications for Motorists of the (March) 2007 Budget
The general consensus of opinion within the motor industry is that the Chancellor (Gordon Brown) has used the March 2007 Budget to continue the squeeze on motorists, but failed to invest in transport.

The Retail Motor Industry Federation (RMIF) suggests 'The Chancellor has attacked the motorist with the increase in Vehicle Excise Duty (VED) for 4x4s and other large vehicles, but has failed to offset this by any extra investment in transport'.

The RMIF goes on to comment ‘The Chancellor is using road tax as a weapon against motorists, and it will be those who really need 4x4s for their daily lives that suffer most. Families, rural dwellers, farmers, and business users are less able to absorb this further increase, as they are already paying extra to use their vehicles through fuel duty, company car tax, and other measures. In addition, the two pence per litre increase in fuel duty scheduled for October 2007 is a revenue-raising exercise with no benefit for the motorist, who will be paying for other Government programmes. In fact, it will be the motorist who pays for the Chancellor’s apparent generosity.’

Last year's budget (2006) introduced seven bands of road tax. This year's Budget changed the costs of belonging to each band. See below for clarification:

Band A: Emissions of less than 100 grams of CO2 per kilometre. These ultra-clean, usually electric, cars will not have to pay anything.

Band B: Emissions of between 101 and 120 grams of CO2 per kilometre. Cars in this band include the Peugeot 107 and Citroen C2 1.4L. The tax rate for these cars has fallen to £35.

Band C: Emissions of between 121 and 150 grams of CO2 per kilometre. Cars in this band include the Toyota Prius. The tax rate for this band has increase to £115.

Band D: Emissions of between 151 and 165 grams of CO2 per kilometre. Cars in this band include the Ford Ka 1.3 petrol. The tax rate for these cars has increased to £140.

Band E: emissions of between 166 and 185 grams of CO2 per kilometre. Cars in this band include many family cars, such as the Ford Mondeo saloon 1.8i. The tax rate for these cars has increased to £165.

Band F: Emissions of between 186 and 225 grams of CO2 per kilometre. Cars in this band include the Volvo S40. The tax rate for these cars has increased to £205.

Band G: More than 225 grams of CO2 per kilometre. Drivers of these 'gas guzzlers' are hard hit with a rise to £300.

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Thatcham issues Head Restraint Warning
A report by Thatcham, the insurance research centre, has found that more than 125,000 UK motorists and passengers could be injured in accidents because they have not adjusted their head restraint properly.

Thatcham said that more than 63 per cent of drivers have their restraint in the wrong position, making them vulnerable to an injury suffered by 250,000 drivers each year, of whom 25,000 suffer permanent disability.

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Drivers Fined in Insurance Record Chaos
Thousands of motorists are being accused of driving without insurance and threatened with fines or being taken to court because their underwriters are too slow in updating records.

The problem is centered on automatic number plate recognition devices, which every police force in the UK uses to check whether a motorist has insurance and tax and satisfies other legal requirements. If they are at fault, motorists are pulled over. They can be fined, have their cars seized and issued with penalty points.

Insurers are given 14 days to put the renewal data on the Motor Insurance Database (MID) and the police data is updated from that only once every 14 days. So if drivers renew insurance policies just before expiry, they might still register as uninsured for up to a month.

An MID spokesperson said the organisation was aware of the problem and added that there was a 'responsibility on all of us to renew our car insurance policies in time'. The Association of Chief Police Officers said 'The police service is working closely with the MID to get insurance companies, including brokers, to update the system more quickly'.

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Motor Insurance Certificates to be Issued Online
Millions of motorists will be able to arrange their motor insurance quicker and more conveniently thanks to a proposed change in the law announced today said the Association of British Insurers.

The Department for Transport (Dft) today announced plans to enable motor insurance certificates to be issued electronically. Currently the law requires these certificates to be sent by insurers to policyholders by post. Motor insurance certificates are legal evidence of insurance, and are needed when arranging road tax, MOT and by the police.

Justin Jacobs, the ABI’s head of motor insurance, said: "This is good news for customers and insurers. Over half of UK households are now online, and this will enable them to arrange motor insurance more speedily. This will be especially helpful when buying and taxing a vehicle quickly .It will also help insurers provide a faster, more cost-effective service to their customers".

Source: InsuranceAge, March 26, 2007.

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Classic Car Club Insurance Discounts
One of the best ways to obtain further discounts off your Classic Car Insurance is to become a member of a classic car or enthusiasts club. Many of the leading UK classic motor insurers have forged strong relationships with enthusiasts' clubs, associations and affinity
groups.

Members often enjoy discounted rates from well known companies and brokers such as Footman James, Norwich Union, Adrian Flux, Heritage, The AA, Lancaster and Peter Best Insurance among others. As a member of a recognised club you can also support other owners through sharing your knowledge and experience.

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EurotaxGlass's Solves Motor Insurers' Total Loss Headache
EurotaxGlass’s has launched Glass’s Value Assessor (GVA), a new solution providing motor insurers with a consistent, auditable and transparent process for settling total loss claims.

One of the first systems of its kind to reach the market, GVA will dramatically reduce the costs associated with settling disputed total loss claims (upwards of £1,000 per claim), and simultaneously help insurers comply with Financial Services Authority (FSA) regulations governing the ‘fair treatment’ of policyholders.

Over half a million vehicles are subject to total loss claims in the UK each year, and the settlement process can be blighted by protracted negotiations, time consuming administration, customer dissatisfaction and churn, costly referrals to the Financial Ombudsman Service, and even negative media coverage. GVA eases the settlement process by creating a single, fully auditable mechanism for accessing all information required to reach an appropriate total loss valuation.

The Financial Services Authority (FSA) is currently implementing a ‘Treating Customers Fairly’ initiative, which requires insurers to take all appropriate steps to ensure the fair treatment of customers by the end of March 2007. GVA will aid compliance by providing fully-transparent settlement processes based on auditable calculation methodologies and valuations provided by EurotaxGlass’s, Europe’s leading source of new and used car data.

Source: EurotaxGlass's, March 28, 2007.

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Motor Insurance is all about Price....isn't it?
GfK NOP recently undertook research to understand consumer views of motor insurance, both in terms of how they buy it and what they want from insurers. HomeApproved has provided below a synopsis of the findings.

How is Motor Insurance Purchased?
Motor insurance is purchased within three distinct pressures - legal, time and financial. Basically, consumers have to have the insurance; they have to renew or take out insurance by a certain time, so there is a 'crunch point'; and they want to keep the cost low. These pressures are framed within an adversarial context that contains not a small helping of mistrust - shown by these comments from consumers:

• "You're never covered for what you think you are."
• "They (insurer) try to wriggle out of paying."
• "Always have a get out clause."

Time for a New Insurer/Consumer Relationship?
So, is it time for the motor insurance industry to develop a new type of relationship with their customers? It was clear through the consumer workshops that the customer wanted a different type of relationship with their insurer. Consumers provided four key elements for improvement:

1. Real value for money.
2. Make it feel like a service rather than a product.
3. Engage me as a valued customer more.
4. Open and honest relationship.

People are looking to be engaged by their car insurance company as a valued customer. At present, there is not really a relationship and contact tends to be limited to the renewal notice once a year or sales calls.

What is clear is the focus on price from both the consumer and the industry perspective is becoming increasingly tired and there is a desire for a greater engagement between the insurance companies and their customers.

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UK Drivers 'Unaware' of Motor Insurance Formalities
A third of UK drivers are unsure of what their motor insurance covers because they have failed to read their policies. Motor insurance firm Norwich Union has found that just under 40 per cent of drivers do not know what is covered under their car insurance policy, with 33 per cent stating that they had not bothered to read their policy documents and find out.

Additionally, 38 per cent of respondents were clueless as to when their car insurance would expire. Darren Cornish, head of customer experience at Norwich Union, said: "Our research highlights a lack of understanding about insurance.

"Customers who do not know what they are covered for could face disappointment when claiming if their expectations are not met - something which could be avoided if they understood what is in their policy before they need to claim."

More than a third of motorists thought their car insurance would cover them if they left the keys in the ignition and the vehicle was then stolen, the results showed.

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Footman James Redundancies after Aon Acquisition
A major shake up of the board of directors at Footman James, sees two directors lose their jobs. Commercial Director Mark Crawford and IT director David Bird are to be made redundant, according to the company which was acquired by Aon in January (2007).

Meanwhile, Aon's classic car book will be moved into Footman James' Dudley office. There are also plans to merge the high net worth specialist vehicle book in the near future.

The broker is also recruiting up to 15 personal lines sales staff to accommodate future growth. Managing director Paul Matthews said plans for further growth were under development. "Part of our remit from Aon is to grow," he said. "That means looking for further acquisitions which will spread our reach geographically and expand our business lines."

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Supermarket Car Insurance - Is It THE Cheapest on the Market?
Supermarkets have been selling motor insurance alongside sausages and beans for over 10 years. They promised to revolutionise the way insurance was sold by offering simple, cheap policies. So have they kept their promises and can you find cheaper elsewhere?

ASDA - The policy offers only the basics. There is no cover for personal belongings and if the courtesy car option is chosen, a small hatchback is supplied regardless of the size of the car being repaired.

Marks & Spencer - Policyholders can take UK and European breakdown cover. A free car hire/courtesy car comes as standard, as does legal expenses cover.

Sainsburys Bank - Offers a courtesy car as standard, along with cover for personal belongings and up to £200 worth of Sainsbury's shopping vouchers. Legal cover costs extra.

Tesco - There is a basic value policy which, for example, does not have cover for windscreens or stereo systems and does not include a courtesy car. The standard policy comes with personal belongings cover, but legal cover and a courtesy car are optional extras.

VERDICT: If you shop around (online) you can often beat supermarket motor quotes. However, don't overlook Marks and Spencer's policy, because, while more expensive, it comes with valuable extras as standard.

Source: Money Mail, April 11, 2007.

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Private Motor Insurance Market Softening
According to the AA British Insurance Premium Index, the average quoted premium for an annual comprehensive motor policy fell marginally to £802 during the first quarter of 2007. This was £4 less than the all time high price of £806, quoted in the last quarter of 2006.

Motor insurance premiums increased by 4.35% at the end of 2006 as motor insurers attempted to increase rates to keep up with claims inflation, and return the private motor market to profit. It has not made a profit since 1994.

Kevin Sinclair, managing director of AA Insurance, said: "Some distributors, especially online providers, are taking advantage of the rising trend to offer big introductory discounts that has checked premium averages. But there is a limit to how long they can hold back the tide." Sinclair predicted that further rate hikes would occur by the end of 2007.

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Speeding Drivers Take Their Young Passengers on a Deadly Ride
Brake joins insurers to fight for life-saving graduated licensing. Two in three young people say they have been a passenger in a speeding car, and more than half of those put their lives at risk by not asking the driver to slow down, Brake and CIS Co-operative Insurance (CIS) reveal today in a survey of 4,500 young people.

Brake is calling for the Government to make road safety education a compulsory part of the national curriculum and demanding the urgent introduction of Graduated Driver Licensing (GDL) to break the learning to drive process into several stages, so novice drivers develop their skills and experience gradually over time.

Elements of GDL, such as a minimum learning period before the driving test, a structured learning programme and passenger restrictions, are also being called for by the Association of British Insurers (ABI). The deadly issue of speeding is one of the major risks of the road spelt out to young people in Brake’ and CIS’s recently-launched survival guide for students in schools and colleges, entitled Too Young to Die.

In the survey, launched today, young people aged 15 to 25 were questioned and 65% said they had been a passenger in a car driven at more than 40mph in a 30mph limit or more than 70mph on a rural road. Of these, only 42% asked the driver to slow down. Speed is a factor in a third of fatal road crashes and breaking a limit by just a few miles per hour can be lethal. A pedestrian is twice as likely to die if they are hit at 35mph rather than 30mph.

Government statistics show that in 2005 a shocking 1,297 people died and a further 11,535 were seriously injured in a crash involving a driver or rider aged 15 to 25. That’s 35 deaths and serious injuries every day. In total in 2005, there were 3,201 deaths and 28,954 serious injuries on UK roads. Young drivers account for just one in eight licence holders.

The Government recently identified the issue of young driver safety in its Road Safety Strategy Review and indicated it would be overhauling the driving test. But it did not specify whether GDL would be considered.

Source: Brake, April 18th, 2007.

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New Bid to Urge Insurers to Use Recycled Parts
A fresh attempt is being made to urge insurers to join a pilot scheme for using recycled parts to repair vehicles. The British Vehicle Salvage Federation (BVSF) launched the scheme last August, but the federation's chairman has admitted that persuading the insurance industry to back the scheme was an "uphill battle", despite claims it could save the industry £200m.

The scheme would give policyholders the option of repairing their vehicles with recycled parts supplied by BVSF members. But it has already been snubbed by Norwich Union (NU) and Royal Bank of Scotland Insurance (RBSI).

The news came as Allianz Cornhill announced that its own recycled parts scheme had been successful. Policyholders who took part in the scheme, which began last October (2006), gave positive feedback and the safety of vehicles was not compromised, the insurer said. The insurer admitted that the pilot had experienced an uptake of only 25%, but it insisted attitudes were changing.

But other insurers remain unconvinced of the benefits of using recycled parts. An RBSI spokesperson said: "We have not been able to provide a recycled parts solution that would not compromise the quality of repairs." An NU spokesperson said: "We're not seeing the appetite, or the potential, for financial savings."

Source: Insurancetimes, April 19, 2007.

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