Car insurance premiums are going up (40.5% during the past year) and unfortunately it's likely that this trend will continue.
Why? Car insurers say people are making more claims nowadays, partly as a result of the litigation culture unleashed by the growth of “no win, no fee” legal firms. The number of fraud claims, where criminals stage accidents and then make a big insurance claim (“crash for cash”), has also increased. Moreover, one in six drivers admit to having driven without any insurance.
As a result, the insurers whine that they're no longer making any money. For every £100 that insurers currently bring in through premiums, they're saying they now give out £122 in claims. Hiking up premiums is a way for insurers to make up the shortfall.
Whether or not you think this is reasonable, there's not much any of us can do to stop premiums rising across the market. There are, however, many ways to stop your own car insurance premiums rising - and, if you're prepared to try something new, there's something else you can do nowadays too: Allow your car insurer to spy on you.
Telematics technology
One of the big changes that's taken place in the car insurance market recently is the introduction of GPS Telematics technology.
This technology takes the form of a box that is installed in your car, and then keeps track of where and when you drive. It can allow insurance companies to get a more accurate picture of how safe you are and thus the price of your premium.
It's not mainstream yet and the limited number of schemes on offer tend to be from small insurers hoping to make it big in a niche market. They are mainly aimed at drivers who pay relatively high premiums at the moment: so young drivers (or their parents who are paying the insurance bill), as well as people who drive relatively short distances every year.
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For example, a company called I-kube uses GPS Telematics to offer young drivers cheaper premiums. It incentivises 18-25 year olds to stay off the road between 11pm and 5am, the hours when they are most likely to have an accident. The technology monitors whether drivers do go on the road at this time, and if they don’t, then they get a discount.
Another scheme, Insurethebox, works by insuring you for a “base number” of 6,000 miles over a year, which you can then top-up if you are going to go over that limit. You can get Bonus Miles as long as you are judged to be doing enough “good driving”, which is defined by the type of roads you use, whether you accelerate rapidly a lot and heavy breaking.
I ran a check to see what kind of quote Insurethebox would give me. I'm 24 year old journalist who drives a Ford Fiesta when I'm at home in Cheshire. In this example, I said that I owned the car and that I drove 6,000 miles a year (4,000 personal; 2,000 business).
The best quote I could find was £404.23 a year from echoice RSA. Insurethebox's best offering was a long way behind, at £871.47 a year. Insurethebox argues that its average driver would get 600 free bonus miles every year, and this would add about 10% to the savings.
It's also true that these quotes depend greatly on individual circumstances. Insurethebox claims that it would provide the cheapest premium to a 21 year old scaffolder from Birmingham with a Ford Focus that he drives 6,000 miles a year.
So, it's always worth doing your own check on the best car insurance deals out there for you.
Still, all this telematics technology is very well if you consent to it, but the question is: who else is watching you?
Everyone's joining in
There’s clearly a Big Brother dimension to telematics, as insurance companies will have so much more information about your lifestyle and behaviour than with a normal scheme.
But you may not feel too concerned... until you realise that it’s not just that insurers you give consent who want to monitor how you drive.
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Already, groups like the Insurance Fraud Bureau look through huge databases (with information on car insurance policies, insurance claims and whether cars have been written off or stolen) in order to find suspicious kinds of behaviour, which they can then investigate and tackle.
And just this week, the British Insurance Brokers’ Association said in its statement to the House of Commons Transport Committee that it had been working with driving licensing organisations like the DVLA (Driver and Vehicle Licensing Agency) to get “secure access to driving license records from the DVLA database”.
It wants to use this access to find out information like a driver’s date of birth, address, convictions and penalty points. It argues that this access could cut fraud and allow insurers to provide more accurate premiums.
In other words, car insurers are now claiming that in order to stop fraudsters, they need to see more information about our driving records.
So, in the future, you’ll need to not only fight against rising costs, but also to keep a beady eye on who has access to your records. Stay watchful!
Tell us what you think might be the future of car insurance
Are you a fan of this new technology or is this Big Brother technology gone mad? Tell us what you think using the comments box below!