The great car insurance rip-off

by Cliff D'Arcy on 09 September 2011  |  16 comments
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In some parts of the UK, it costs twice as much to insure your vehicle!

If you think your car insurance premium has gone up steeply this year, then spare a thought for the furious motorists of Northern Ireland.

Car insurance is a con

In the past two years, car drivers in Northern Ireland (NI) have seen their insurance premiums rise by more than seven-tenths (73%), according to consumer group the Consumer Council for Northern Ireland. For young drivers, premiums have more than doubled, up 112% since 2009.

What's more, the average premium to insure a car in the region is now nearly £924, which is a whopping 84% more than elsewhere in the UK. This year, some young people and students will hand over several times the value of their vehicles in insurance premiums. Ouch!

Hence, the Consumer Council has asked the Office of Fair Trading (OFT) to investigate the market for car insurance in Northern Ireland.

A vicious circle

One problem faced by motorists in Northern Ireland is the rising cost of meeting claims from uninsured drivers. As car insurance in the Province becomes more expensive, growing numbers of drivers (particularly poor, young and newly qualified motorists) decide to break the law by driving without insurance.

When uninsured motorists are involved in accidents, uninsured claims are met by a central pot contributed to by all motor insurers. Thus, a vicious circle arises: more uninsured motorists increases the claims met by insured motorists, pushes up their premiums, and encourages even more drivers to go without insurance.

Without intervention, a high proportion of motorists face driving illegally without insurance, or being forced out of their cars. In lightly populated Northern Ireland (a Province of 1.8 million people), more than four in five journeys (81%) are made by car. Also, the cost of petrol and diesel is higher in the Six Counties than in mainland Great Britain, so its motorists face serious squeezes.

In addition, thanks to higher compensation awards and legal costs, damages for personal injuries (especially minor whiplash claims) tend to be higher in Northern Ireland than in England and Wales. This is partly due to aggressive marketing by claims-management companies keen to tempt consumers into claiming for even the most trivial accidents and injuries.

'Treasure Ireland' for insurers

Another reason for high insurance premiums in NI is a lack of proper market competition.

A mere 15 insurance companies will cover cars in the Six Counties, versus 51 insurers covering the rest of the UK. Also, the NI market is much smaller than those of England, Scotland and Wales, with this lack of scale leading to less competition for customers.

As a result, research by the Belfast Telegraph newspaper found that car insurance quotes for Northern Irish drivers are, on average, twice those quoted to drivers in southern England.

The paper found that the cheapest quote for a 40-year-old female driver in Belfast was £1,400, almost twice the £750 quoted to a driver with the same profile living in leafy Buckinghamshire. Switching a 60-year-old male driver from Belfast to Buckinghamshire slashed his premium from £840 to £491.

This is a UK-wide problem

This problem is not just confined to Northern Ireland.

In other parts of the UK, insurance premiums have spiked upwards, notably in major cities such as London, Glasgow, Liverpool and Manchester. Also, fraudulent insurance claims bump up the cost of car insurance by £900 million a year. This adds £40 a year to the cost of a typical car insurance policy.

Drive down the cost of your insurance

To help consumers fight back against rising insurance premiums, the Consumer Council has teamed up with the Association of British Insurers and the British Insurance Brokers Association to produce this free leaflet for motorists:

> Driving down the cost of car insurance (1.6Mb PDF document, needs Adobe Acrobat Reader).

Here at lovemoney.com, we're very conscious of the rising cost of car insurance. That's why I've written The 17 worst car insurance mistakes and our Editor, Donna Ferguson, has produced these 25 ways to cut your car insurance.

Over to you: what's your best tip for driving down the cost of motoring when times are tough? Please let us know in the comments box below!

More: Cut the cost of your car insurance | Get £100 cashback for good driving | The multi-car insurance rip-off!