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UK Car Insurance Industry Watch, October 2007 |
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This regularly updated section of the HomeApproved web site will cover the latest trends, research, opinion and developments in the UK car insurance sector. Motor
insurance premiums not yet hit by impact of floods Experian’s latest Motor Insurance Benchmark has revealed that the average quote for comprehensive cover in the direct market reached £567.30 during quarter three (July, August and September), but it was only 0.8% higher than the average quote in quarter two (£562.70) despite the recent floods. The broker market, however, saw a large increase in the average premium rate compared to the previous quarter for both comprehensive and third party, fire and theft. Insurance premiums shot up in July (comprehensive from £495 in June to £538 in July and third party, fire and theft from £570 to £632) and continued to climb for the rest of the quarter. The average quote of £639.70 for third party, fire and theft insurance premiums in the broker market is now at its highest point for any quarter since July 2005, when Experian started collating this information. However, the increase in broker prices follows a dip during June, when broker prices fell to their lowest point since July 2005 for both comprehensive and third party, fire and theft. ENDS How
your job affects car insurance premiums Price comparison service Confused.com used the template of a 32-year-old man driving a Ford Mondeo LX and living in London postcode area NW1, with a maximum no-claims bonus. Its research found that footballers took the biggest kicking, being forced to fork out 1,348 pounds per year for fully comprehensive insurance. Premiums for comedians were also no laughing matter. They ranked second highest at 1,227 pounds, followed by stuntmen, fortune-tellers, circus employees, minicab drivers, national press journalists and builders. Firewood merchants and cleaners rounded up the top 10, while bee-keepers, mechanics, driving instructors, bin men and telephone salesmen made up the 15 most expensive occupations. At the other end of the scale, secretaries were found to enjoy the cheapest premiums, at just 501 pounds per year. Police officers - commonly upheld as among the safest drivers - came second in the cheap premium league, with average car insurance costs of 574 pounds. Others in the top 15 included computer consultants, paramedics, bank managers, doctors, lawyers, teachers and firemen. Naturalists, chauffeurs and underwriters were also low-risk. Source: Reuters, LONDON ENDS Pre-Budget
Speech - Gas Guzzlers to Pay the Penalty That could include road-pricing schemes, tax breaks for energy efficient cars and penalties for gas-guzzling drivers. Under measures already announced, the Vehicle Excise Duty rate is to be raised up by £5 a year for all but the cleanest cars, and from £300 to £400 for the biggest gas-guzzlers. The Chancellor's report said the figure on which company car drivers' fuel allowances are calculated will rise from £14,400 to £16,900 'to enhance the environmental incentives to drive fewer miles'. Ministers are expected next year to reduce the capital allowances companies can claim on the biggest polluting cars. This will put pressure on employers to force employees into 'greener' cars. ENDS Broker
Banned from Trading Richard Michael Wolf was the sole director of Rotheville Limited which advised on and sold insurance. The FSA found Mr Wolf was not fit and proper to work in the regulated financial services industry as he did not act honestly and he failed to comply with its requirements. Therefore, the FSA ruled that he could no longer operate as an insurance broker and Rotheville could no longer conduct regulated business. The FSA took the action after two insurance brokers revealed that Mr Wolf failed to pass on his clients' insurance premiums to them - leaving the clients potentially uninsured. At one stage Mr Wolf owed over £42,000 of clients' insurance premiums to various brokers. Additionally, investigators found that Mr Wolf did not have adequate systems and controls in place to protect his customers. Mr Wolf did not have processes to ensure that clients' premiums were passed on to insurers on a timely basis, to check that clients were insured, or to check when clients’ policies were due for renewal. He also failed to disclose information to the FSA. Jonathan Phelan, head of retail enforcement at the FSA, said: "It is imperative that firms handle clients' money properly and do not leave them believing they are insured, when they are not. Mr Wolf's conduct was particularly serious as it left his customers at considerable risk. Stopping someone from carrying out regulated business in the financial services industry is one of the toughest actions the FSA can take and we feel it is necessary in this case to protect both consumers and the reputation of the market." ENDS Women
only Insures - Best Value in the Market? By focusing solely on a particular market niche these brands have been able to provide greater choice for female drivers, extra benefits such as handbag theft cover and in some case more competitive premiums. However, latest research suggests that women should look beyond the brand and glossy advertising and marketing because female-focused car insurers will not always deliver the best value-for-money policy. A search on a leading insurance comparison web site for a young, newly qualified woman driver found that female focused brands did not come out on top. It is imperative that women drivers shop around the complete market and look at all insurers, not just those targeting women, in order to get the best motor cover. It may be that the female-orientated insurer is the cheapest, but the premiums and cover on offer should always be assessed alongside the mainstream market. ENDS Gocompare
welcomes growing fronting awareness In September, Gocompare.com’s own research revealed that 66% of parents would consider breaking the law by insuring their child’s car in their name – or ‘fronting’. It is technically fraud and the consequences if caught are serious for both parent and offspring. Hayley Parsons, managing director of Gocompare.com commented: “It is good to see the FOS speaking out on this issue. When we were researching the subject it was clear there were no active industry initiatives and little in the way of published data. It was beginning to look like the issue the industry didn’t want to talk about when in fact, more awareness could help to cut costs and drive down premiums for everyone. “Our research showed that fronting is a very real issue at a time when car insurance premiums have hit record levels. Our advice remains the same: Research the cheapest cars to insure for a young driver, consider schemes such as Pass Plus to reduce premiums further and then shop around for the best price for insurance in the young driver’s own name. "That way you stay legal and start accumulating no claims bonus as soon as possible.” ENDS Insurers
face supply shortage as bodyshops decline Insurance companies have expressed concern over the decline in bodyshops, claiming to be looking at ways to help shops reduce overhead costs. Mike Owen, head of bodyshops for the Retail Motor Industry Federation, said 15% of UK repair shops – varying in size – had gone out of business because mechanics were unable to stay afloat in the face of low margins, a soft economy and poor prices paid by insurers. In the past 10 years, the number of bodyshops has decreased by 31% and capacity has dropped by 13%, according to a report by Trend Tracker. Insurers generate about 85% of business for collision repairers. Owen said that if there were fewer mechanics’ shops to choose from, companies ran the risk of not returning vehicles to policyholders as quickly as promised. Owen said insurers pay up to 40% less than the market charges for repair work. Motor insurers agree the declining number of repair shops – a drop from 4,770 to 4,054 in the past year – could be problematic for supply, but they argue that lower prices paid to mechanics is due to the high volume of business insurers generate. Allison Stevens, head of supply chain for Norwich Union (NU), said: "We’re considering the risk that if that trend continues (shops going out of business), there could be a shortage of supply. "It’s not in our interest to drive prices to a level where they can’t afford to do business in the future. We can’t afford to keep paying more and they can’t afford to reduce margins." Norwich Union uses about 500 body shops for its policyholders directed repairs. ENDS Car
owners "misled" over motor insurance The report, which investigated leading sites including Moneysupermarket.com, Confused.com, GoCompare, Comparethemarket and TescoCompare, found that major insurers are often not listed and that no insurer appears on all of the top ten sites. Defaqto said that the so-called "aggregator" sites make incorrect assumptions about a customer and manipulate levels of cover to make the policies look cheaper, for instance, by automatically giving a customer a higher excess than they might want. The inconsistencies mean that car owners must still go through three or four comparison sites to really compare the market, defeating the purpose of the sites, Defaqto said. The research group also criticised the sites for encouraging drivers to select policies based on price alone. Mike Powell, general insurance consultant at Defaqto, said: "People using these sites should be careful to check exactly what they are being sold. In particular, they should pay close attention to excess levels and policy add-ons. Customers should also think carefully before buying the cheapest policy as often the cheaper policies will not offer extra benefits like a courtesy car or assistance following an accident." The Resolution Foundation recently called for the Financial Services Authority to regulate the price comparison market like banks and building societies because of concerns over the influence they now have over consumer's decisions. ENDS |
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