Yes, insurance is unfortunately a necessary evil that we need to have but no one likes buying!
When I got quoted a large renewal increase on my car insurance a few years ago, I got a friend who works in insurance to explain why we seem to get shafted regularly by insurance companies. I’m acting as the messenger here, just passing on what I‘ve been told so please don’t shoot the messenger! This is what they told me (there are no doubt other factors, but they kept it simple for me
).
- cars have become more hi-tech, and much of that tech is expensive to replace or repair, which adds to the cost of parts and labour rates for repairs.
- claims management companies who put people in expensive hire cars while their own cars are being repaired, rather than letting them use a repairer’s small courtesy car for a couple of weeks also adds to overall costs that we all end up paying for through increased premiums.
- the government increases Insurance Premium Tax every so often; the insurance companies are a collections agency for the government for this tax so don’t get to keep it, but it’s seen as a premium increase by customers.
I found these articles below on car insurance claims inflation. These do highlight the year on year inflation rate on car insurance claims is significantly higher than the general inflation rate, and Insurers will need to increase their premium rates on average by an amount that’s equal to claims inflation just to stand still, so if claims costs go up, then we end up paying more.
UK motor claims payout inflation surged by 8.6% in 2018, taking the average cost per claim to £4,791. Analysts in Willis Towers Watson’s Claim Metrics benchmarking unit say the sharpest rise took place in Wales and the North East at 22.4% between 2016 and 2018. The region with the highest...
www.cirmagazine.com
UK motor insurers paid out 8.6% more per claim in 2018 on average than they did the previous year, and these costs are set to rise further amid Brexit uncertainty.
www.theactuary.com
@280jl; I did a ‘back of the fag packet’ calculation to see if your current £650 premium could be reconciled back to what your were paying 5 years ago. I assumed a car claims inflation rate of 7% a year, which seems a reasonable assumption, based on those articles at the links above. 7% per year for 5 years gives a cumulative figure of just over 40%. On top of that, insurance premium tax has increased from 9.5% November 2015 to the current rate of 12%, so that’s another 2.5% on top of the 40%. Increasing your £450 premium from five years ago by 42.5% gives a premium of £641, which is pretty close to your current premium.
At the end of the day, insurance will always be a grudge purchase, and I’d encourage anyone to always
shop around at renewal time - especially if their existing insurance company is being greedy.