UK Car Insurance Industry Watch, August 2007

This regularly updated section of the HomeApproved web site will cover the latest trends, research, opinion and developments in the UK car insurance sector.

Driving abroad and car insurance - A Reminder
If you're going on a continental driving holiday this summer, it's important to be prepared - and insured. Holidaymaker's planning to drive abroad this summer, whether in their own vehicle or a hire car, should brush up on a few rules to avoid the hidden hazards and unexpected fines that motoring on foreign roads can throw up.

Insurer Esure says half of British motorists who drive abroad in their own cars go without checking their insurance policy first, when in most cases you need to notify your insurer in advance or pay a top-up premium to be covered.

If you take no action, your insurer will provide the minimum third-party cover if you drive abroad, but this could leave you seriously out of pocket if your car is stolen or damaged. If the car needs to be repatriated following an accident, you will typically face a £1,000 bill.

Some insurers include more automatic cover abroad than others: for example, Esure and Direct Line offer three days (designed for weekend breaks) and Marks and Spencer and The AA 90 days. For longer trips, Esure typically charges an extra £11 and Direct Line £18 for a week in France, depending on the car. Esure and Direct Line ask policyholders to contact them before they go abroad, while the AA only needs a call if you need to extend cover beyond 90 days.

Breakdown cover should also be high on your pre-holiday shopping list. Breaking down in a foreign country can be stressful if you don't know the language fluently and are unaware of typical costs. Consider taking out foreign breakdown cover if it is not already included in your UK breakdown plan or tagged onto your motor insurance policy.

Hiring a car abroad
Tracking down a bargain hire car abroad is a breeze on the internet. But be clear about what's included in the basic price (insurance, taxes etc) and the optional extras that drive up the bill. There are fees for extra drivers, young drivers and child car seats (typically £5 a day), and penalties if you return the car without a full tank of fuel, which can be £50 on top of the cost of the fuel.

Some extra insurance options are well worth considering, such as collision damage waiver and theft damage waiver (sometimes sold as a single plan), but others, such as personal accident insurance, are rarely worth taking.

Collision damage waiver and theft damage waiver protect you if the hire car is damaged or written off in an accident or is stolen. But even with this cover, you will be liable for an excess, which can vary dramatically but is typically £350 to £800, according to comparison service excess4carhire.com. You may be asked if you want excess waiver cover (also known as 'super collision damage waiver'), which will reduce, sometimes to nil, the excess required. This can be expensive, typically ranging from £6 to £12 a day, so you have to weigh up whether you prefer to shoulder a high excess should the worst happen.

Even with this extra cover you may still have to pay for certain kinds of damage, such as to the tyres, windscreen, wheels, or underneath the car.

Source: Guardian Unlimited Insurance.

ENDS

Chaucer to boost motor business by 10%
Chaucer is gearing up for a potential turnaround in the UK motor market by increasing the amount of business it will write in the sector for 2008. The Lloyd’s insurer intends to increase capacity for its motor portfolio by around 10% next year in anticipation of improved market conditions.

Chris Dixon, divisional underwriting and development director at Chaucer, said: “It is our view that the market should start to see the benefits of an upturn in premium rates next year.” Overall the Lloyd’s insurer will cut its capacity on Syndicate 1084 by 8.3% to £445m for 2008 with the proposed increase in UK motor business partly offsetting the targeted reduction across non-motor classes.

ENDS

Car running costs drop to 2005 levels
The cost of running a car has dropped to around the same level as two years ago, spelling trouble for the government's drive to promote public transport, research shows. The day-to-day expenses of running a car, such as fuel and maintenance, have fallen close to levels of 2005, according to the RAC's annual "cost of motoring index".

Car maintenance costs have dropped 8 percent to 273 pounds per year in the past 12 months while the real cost of fuel consumption has declined 10 percent. Petrol prices are 0.24 percent lower than a year ago and diesel is down 1.22 percent, but growing fuel-efficiency has led to the larger drop in total annual cost.

Lower running costs have helped slow the rise in the overall cost of motoring: it rose 3 percent in the past year, compared with an 11 percent jump the previous year. The average family car now costs 5,627 per year to keep on the road -- an increase of 162.70 pounds year-on-year, according to the index.

It charts the costs associated with owning and running 17 models of car, including purchase price, depreciation, insurance, fuel, servicing, VAT and breakdown cover. While the cost of maintenance and fuel has declined in the past year, depreciation and motor finance costs have risen.

Depreciation - the largest cost factor - rose 6 percent to an annual 2,357 pounds. Meanwhile, the cost of borrowing jumped 17 percent to an average of 169 pounds on the back of five rises in the Bank of England base rate in the past year.

RAC technical director David Bizley said the figures were unlikely to help the government meet its environmental targets. "It's good news that the day-to-day costs of motoring are in decline, which will help to relieve some of the burden of running a car," he said.

"However, with both bus and train fares continuing to rise, and with growing congestion making journey times unreliable on our roads, the fall in car running costs is unlikely to help government in its attempts to persuade motorists to make greater use of public transport.

"If motorists continue to be wedded to their cars, then financial incentives are going to be needed to encourage the uptake of greener vehicles."

ENDS

Safety system in cars would reduce accident death toll
Some 380 lives lost each year on Britain's roads could be saved if cars were fitted with Electronic Stability Control (ESC) as standard.

New research published by the Department for Transport shows vehicles equipped with ESC, which helps keep the car in control when a driver reacts violently to an accident, are 25 per cent less likely to be involved in fatal accidents.

But a separate study by motor industry research centre Thatcham has shown that less than half of new cars sold in the UK have ESC fitted as standard. This compares with 58 percent in Germany and 75 per cent in Sweden.

Researchers from the insurer-funded research centre at Thatcham in Berkshire are now urging manufacturers to fit ESC as standard across their model ranges to help prevent the risk of collisions and cut unnecessary deaths.

ENDS

UK drivers pay a staggering £2.36 billion in excess for car insurance each year
All motorists have excess on car insurance but what is not known is exactly how much excess we all pay each year in the UK, well until now that is. Every year UK drivers are paying a staggering £2.36 billion in excess and that is on top of the £8.5 billion UK people spend out on their annual car insurance.

A leading online comparison website has also warned that what seems to be a great and brilliant savings exercise can really become an expensive problem, to make this sound as simple as possible for example a saving of less than £100 on your car insurance premium may end up costing you more than ten times the amount in an event of a claim.

ENDS

Aon agrees to buy classic car insurance broker Firebond for undisclosed sum
Aon Ltd, a subsidiary of US insurance broking giant Aon Corporation, said today it has agreed to buy classic car insurance broker Firebond for an undisclosed sum. The deal follows Aon (nyse: AOC - news - people )'s buyout of UK classic car broker Footman James in late January this year.

'Firebond is a natural fit with both the Aon Classic Cars business and our Footman James business,' said Aon UK's chief executive, Peter Harmer.

'Firebond will now be able to utilise the buying power and resources of a large broker to provide clients with the best value and service available. Our wider product provision, infrastructure and backing will provide Firebond with new opportunities for the future development of the business,' he said.

Source: Forbes.com.

ENDS

Defaqto launches unbiased online car insurance tool
Research company Defaqto is about to launch its own online car insurance comparison tool, ‘Defaqto Compare!, which it claims will avoid the usual commercial bias and for the first time give customers an accurate idea of the differing levels of cover on offer.

At a time when most other online car insurance sites are being accused of ‘selling' customers to the highest bidder (i.e. promoting whichever motor insurance firm they are currently in cahoots with, rather than one which actually offers the cheapest car insurance), Defaqto's system protects against bias by not charging a fee to appear in its listings.

That means that those direct insurers who usually refuse to pay listing fees (such as Direct Line) will still be represented, offering consumers greater choice and a more faithful representation of the market. Furthermore, Defaqto has promised that the new system will be able to compare car insurance quotes based on cover level as well as price; another bonus for the consumer.

Regarding the new online car insurance service, a spokesperson for Defaqto said: "This is a real breakthrough in empowering consumers to ensure that they get the cover levels they need. It avoids the lottery of wondering whether the cheapest product selected on a web comparison site actually provides the cover levels needed."

ENDS

LV.com launched
LV= (formerly Liverpool Victoria) have unveiled a bold new online domain name: LV.com. In its release the company stated: 'With the launch of LV.com, LV= has not only secured a single memorable web address that fits with the Society’s new brand identity but also one of the shortest url's in the insurance market.'

Paul Wishman, head of eCommerce at LV= said: "The launch of a memorable, intuitive and relevant online identity is a crucial next step in establishing our refreshed, modern brand. It helps us communicate our mix of product value and mutual values to the widest possible spectrum of potential customers."

LV= will support the launch of its new online identity through a high-profile motor insurance advertising campaign this autumn, as well as rolling it out into all online and direct marketing, product literature and all other Group communications. The society plans substantial development of its online presence across all business areas over the coming months, including enhanced services and customer experience.

Mr Wishman added: "LV.com will help our products stand-out and perform against strong competition in our direct markets, particularly general insurance where we have clear ambitions to become one of the biggest household brands."

ENDS

Fool.co.uk selects comparethemarket for motor insurance
Comparethemarket.com has confirmed that it is providing the motor insurance quote service on personal finance information website, Fool.co.uk. The products fall under The Motley Fool Insurance Service offering.

Visitors to The Motley Fool’s Insurance Service Centre who select car or van insurance as their area of interest are taken to a page powered by comparethemarket.com. The site then searches more than 300 prices to find a range of suitable quotes.

Kal Samra, Managing Director of comparethemarket.com, said: "This is a significant partnership for us. Fool.co.uk is a well-trusted site used by hundreds of thousands of people in the UK for advice and recommendations on their personal finances. That it has entrusted their price comparison function to us is a real accolade for our brand and our service. In just a few days we have already found the perfect insurance deal for hundreds of its users and look forward to providing our services to many more."

Paul Warburton, Senior Product Manager at Fool.co.uk said: "We needed a partner who could provide a wide range of excellent policies and cover at the right price. Fool.co.uk users are shrewd about their finances and know how to look for a good deal. comparethemarket.com provided exactly the service we were looking for, quickly and efficiently. We are confident that this is the beginning of a strong and lasting partnership."

ENDS

UK drivers don't know stopping distances
UK drivers are so bad at understanding stopping distances that some believe that it can take more than two miles to stop a car from 70mph. More than half of British motorists could not correctly identify the correct stopping distances in a poll conducted by motoring insurer Highway.

• Most don't know correct stopping distances.
• When told, they can't judge how far distance is.
• 18-30 age group have best knowledge.

In addition, when drivers were told the correct answer and asked to show how far away that distance was, most couldn't do so accurately.

The survey revealed that only 9% of drivers could get within 10% of naming the correct stopping distances for a car moving at 30mph, 50mph and 70mph. Only two of 250 drivers (0.8%) questioned correctly identified the correct stopping distances in metres for the three speeds.

However, almost 10% of the motorists claimed it would take between 0.3 of a mile and 2.18 miles to stop a car at 70mph. The higher figure is more than 36 times longer than the correct answer, which is 96 metres, including thinking time.

Just 5% of motorists correctly judged each distance when informed of the correct answer, with 66% underestimating it. When asked to mark out the stopping distance at 30mph (23 metres), drivers marked out distances between six and 41 metres.

When asked to mark out the stopping distance at 50mph (53 metres), drivers marked out distances between 15 and 81 metres. Drivers aged 18-30 were best at knowledge of braking distances, but drivers aged 31-50 performed best when it came to judging the distances.

ENDS

Top of Page