Saturday 20 January 2018

Charlie Weston: How to get the best deal on motor insurance

'Motor insurance companies know that a small percentage of people will accept an inflated premium and just pay it. Don't be one of those mugs'

Car insurers will up your premium in the hope you'll pay without question.
Car insurers will up your premium in the hope you'll pay without question.

IT is enough to drive you demented. At a time when prices are falling generally in the economy, motor insurance premiums are going up faster than mercury in a heat wave. It has come to the stage that those yet to renew their policies this year are now dreading that thud on the door mat signalling a letter from their insurer with a renewal quote.

The average motor premium has shot up by 16pc in the last year, according to official figures from the Central Statistics Office. That means an extra €80 on a €500 premium.

Many are being hit with much sharper rises. Young drivers, in particular, are being told to pay €3,000 - even €4,000 - when they had to pay €2,500 last year. Insurers are losing money so they decide to play it safe and ditch high-risk drivers like those under the age of 30.

There are a number of reasons for the huge jump in the cost of premiums, and few of them have anything to do with drivers. Bad management by insurers and weak regulation are two culprits. Sound familiar? Isn't that how the banks came a cropper?

Well, it is happening again.

Regulators are not on top of the situation.

Correspondence emerged recently showing that Central Bank deputy governor Cyril Roux, who is also the financial regulator, saying he did not have sufficient powers or staff to effectively regulate the insurance sector.

Motor insurers are losing money because they made bad decisions about pricing and the level of reserves they have put aside for claims.

The upshot is that drivers are paying the price, and staff in insurance companies are being laid off.

RSA led the market in a price-cutting war that proved unsustainable. Its failure to have enough money in its reserves meant its British parent had to rescue it with a €400m bailout. It is now laying off around 200 staff. Liberty Insurance is laying off 270 staff.

The market is still reeling from the collapse of Setanta Insurance last year. The hole in its accounts to pay claims is being filled by - you guessed it - drivers.

Motor insurers under-priced and under-reserved and regulators failed to identify the problem and intervene.

The pity is this is exactly what Quinn Insurance was doing, a situation that prompted regulators to force it into administration five years ago.

The market is also being hit by more cars on the road. More cars mean more claims, which means higher premiums. And a rise in claims is also a feature. Some of these are fraudulent.

Another feature of the sector is more solicitors getting involved in claims. This inflates claims costs and is happening despite the fact that the State's Injuries Board was set up specifically to avoid this.

But none of this means drivers have to take whacking great rises in their insurance premiums without a fight.

The smart thing to do is show no loyalty to your insurer. Treat your renewal notice as a guide and play one insurer off another.

It is worth keeping in mind that your renewal quote is a big try-on. Insurers are playing a percentage game. They push up the new quotation beyond what they need to charge.

They know the savvy drivers will challenge the new premium they are expected to pay and get a better deal by going to another insurer, or forcing their existing insurance company to match a better offer they got elsewhere in the market.

But they also know that a small percentage will accept the inflated new premium and just pay it. Don't be one of those mugs.

If you are claims-free, it makes sense to regularly switch insurer.

Compare rates from different insurance companies by ringing them or going online. It is worthwhile using a broker. It won't cost you any more than going directly to the insurer as the broker is paid by the company.

You may be entitled to a discount if you have more than one type of insurance policy with the same company. Ask also if there are other discounts you might be able to get.

Other tips to keep the costs down include being conservative with the car's value. This is important as you can only claim what the vehicle is deemed to be worth by the insurance company's assessor. People often over-value their car. Check car sales adverts to get a good market indicator of your motor's value.

And be careful about excesses. This is the amount you have to pay yourself before you can make a claim. Lately, insurers are imposing higher and higher excesses. This reduces the risks for them, but means you end up not claiming for small accidents. Excesses of €500 are not uncommon these days, but when they get to that level they rather negate the value of having insurance.

Irish Independent

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