What's driving down motor insurance?
After years of spiralling costs, it looks like premiums for car insurance are reducing. But Why?
Is it finally time to say motor insurance premiums are falling? After being on a one-way trajectory for the last three years (up 60pc), it seemed as if even the careful, safe driver couldn't get a break. Recent events should mean prices start falling, but is it actually happening?
Why should costs go down?
The main cause of rising premiums was due to uncertainty in the market. After the Quinn Insurance collapse, a number of insurers were found to have been under-pricing in a race to the bottom, leaving them exposed financially. They have been patched up or bailed out, so things are now on an even keel.
Setanta Insurance, the Malta-based 'Irish' commercial insurer was expected to be bailed out by at least €95m to cover losses, but a court case found the taxpayer wasn't liable after all.
And finally, after a decade of waiting, the Book of Quantum was updated, giving clearer guidance on the cost of motor claims to courts. Unfortunately, its frame of reference was to show actual awards for injuries and accidents, instead of bench-marking them against other countries, where claims are typically far lower, so courts are still making huge payouts, causing insurers to take fright. Guess who pays up?
It's been a long time coming, but insurers themselves are now getting to grips with fighting fraud and outlandish claims which they weren't prepared to oppose, leaving policy-holders picking up the tab in higher premiums.
Have prices reduced?
It's relative. Renewal notices are still causing heart attacks in some quarters, but finally people are getting a number of quotes to choose from. However, companies are still carefully cherry-picking their customers, and if you present as risky business, you won't get covered.
It is perfectly possible for the same driver to get wildly varying quotes as you can see from Table 1 compiled by Chill.ie - the same set of circumstances are good business for one company, and a massive risk to another. There is no telling, which is why it is essential to shop around on every renewal date.
With banks, credit unions and even supermarkets flogging insurance, competition is not a problem for consumers. Understanding the bewildering array of policy conditions is.
How can I get costs down?
There are practical things you can do to try and reduce your premium. These include: l pay annually instead of monthly. Many insurers (though not all), add a hefty interest charge if you pay by monthly direct debit instead of in one go. It can be as high as 20pc, adding a fifth to your premium. If you can't afford the yearly premium, even a loan from the credit union at seven per cent to pay it is better value; l although you legally require Third Party Fire and Theft Insurance (TFPT), most people opt for Comprehensive, which covers your car's damage in the event of a claim. If your car's not worth much, get a TPFT quote and go for that instead, especially if you don't drive much or have an older car; l the typical excess on a policy is around €250. By opting for a higher one (eg. €500), your premium will reduce, but it does mean you can't make small claims. l drive safely. Reducing mileage, penalty points and convictions will mark you out as a better bet. l avoid older cars. If you can afford it, keep your car less than 10 years old. Buying a smaller engine and newer motor will result in premium savings. l safety first. A car alarm and overnight closed or supervised garage will cut costs. l add a driver. It may sound counter-intuitive, but adding a named driver with a full licence will reduce your premium. Add two, or three to increase the effect. Many insurers offer discounts up to 20pc rather than piling on premiums for safe additional drivers, as long as they actually use the vehicle. l remove a driver. The opposite is true for a driver under 25, or anyone with penalty points or convictions. They'll cost you more in premiums, so ditch them until they are clean. l watch your value. It may be your pride and joy, but a car is only worth what someone else will pay for it. Over-insuring means you'll pay the premium, but won't get the benefit, as in the event of a claim, the assessor will only repay what s/he thinks its value is.
Check on carzone.ie or other sites for similar models to insure for the right amount.