Saturday, 4 September 2010

Insuring a fair approach

I want to talk in this article about a subject close to my heart. As a nineteen year old male living in the formerly industrial North, the fact that car insurance is expensive has become an accepted fact - unwillingly, but it is a cross which has to be borne. Give the size of the quotes I've been getting, it's unsurprising that many insure in their parents' names or don't bother at all.

Seriously, let us look at the facts. I did a quotation the other day on a friend's old Austin Maestro Mayfair 1.3. Not exactly a road-burner, and neither is it a car that many would find an aspirational item nowadays. Yet my insurance quote would have bought you a Daimler Sovereign. Not insured one, fuelled one, or even rented it for a week. Bought, outright. Compare this to the quote I got on a V8 SD1 as a named driver. Still extortionate by the standards of most people, but a thousand quid is stupidly low for anybody's insurance at my age. And what's the fine for not having insurance? £200, 6 points (A ban, but if you're not insured this won't stop you), and a slap on the wrist.

Call me biased, but this does not strike me as a fair system. It punishes the innocent - the safe, sensible, mature-minded drivers - by lumping them in with the idiots as a matter of course and charging accordingly. It's also gender-biased - granted, there are a higher percentage of idiot male drivers than idiot women, but is this really ample justification for doubling the premium for those who lack the ability to give birth? And I'm not kidding - that really is the rough nature of the imbalance.

Now, I'm not calling for the abolition of insurance. To do so would be frankly idiotic. But I do think a fairer system should be created. I've seen and discussed several methods over the last year or two, and I really think that some would be better than the current system.

First, there is an idea proposed by my friend John Orrell, who if he drove would qualify for cheap insurance on account of his age and his post code. This model can be called the 'benefit of the doubt' model. The idea behind it is that we each pay a reduced sum to insure a car - not a stupidly low one, but enough to act as an incentive. Let's say no premium of more than £1000 for young drivers on anything below group ten insurance. This is then reduced with No Claims Bonus every year, as per mature drivers - let's say an annual drop of ten percent for the first year, five thereafter. But if anybody makes a claim for an accident that is the fault of the policyholder, his or her policy should then skyrocket. That which before would have been £1000 would be, say, £2500 or £3000 after the accident, and that would take years to return to a sensible level. This would be an excellent way to punish those who are guilty whilst not unduly taxing the innocent.

Come on, though! Insurance companies want your money! They're not going to give in to that sort of idea without a fight. So here's idea number two, suggested in the Times about a month ago by a correspondent whose name I have sadly forgotten. Rebates. We keep the current system, however, at the end of the insurance period each claim-free driver receives a 50% rebate. That way, the innocent aren't unduly handicapped save for the first year, the guilty are punished, and insurance companies can help themselves to twelve months' interest on the bit they have to give back.

Nobody with a sensible head upon their shoulders can deny that these two ideas make infinitely more sense than the one we have. But I bet neither is adopted, because it would mean insurance companies lost out. But there would be serious money in plan number three. Why can't one insurance company halve the prices of all young driver insurance quotes, full stop. Yes, they'd be stung once in a while by the idiots, but by adopting a 'clean licences and no fault claims' policy they could weed out repeat offenders. And the amount of business they would attract would certainly compensate for the lack of profit caused by lower premiums.

But will anyone be brave enough to take this step? Thought not.


  1. The man lives!

    Good to see you posting again.

    There is a company in South Africa, OUTsurance claim to assess risk pertinent to the individual and, after three years without a claim will refund ten percent of premiums paid.

    Maybe not as radical a solution as those you propose but at least it is a start.

    Since most insurance companies world wide give on line quotes and, being a student you probably have acccess to free wide band internet through the university and plenty of time :-), why not conduct a study of the comparitive costs of insurance for a young first timer around the world? Pick a car that is available anywhere in the world, such as the Toyota Corolla.

    I would be interested to see the results.

    Everything else is extremely expensive in UK (just consider the disparity in new car prices compared with Europe and we all know that Apple products are far more expensive in UK than in the States) so perhaps we are being ripped off for insurance as well?

  2. Just another thought.

    You know that I emigrated from Europe to Africa some eighteen years ago and have hardly returned since so excuse my ignorance of this, and many other issues pertaining to life back in the old country but I am a bit bemused about the fact that insurance companies now consider it a breach of contract for a parent to put a car on their policy for their offspring to drive.

    When I were a lad (you're from oop north, ey lad?) such a practice appeared the norm. My father insured through Britannic Assurance all his life and like any good salesman, the broker became a family friend of his clients (you are too young to remember the good old days of personal service).

    By the time a father's son had come of motoring age, the father had probably built up the maximum of 60% No Claims Discount and it was this he was risking by including his son on his policy.

    The great advantage was that the overall financial burden to the family was reduced (which son could afford his own insurance policy without tapping his Father?) the disadvantage being that the son, not having a policy in his own name, would not be earning qualifying years towards his own No Claims Discount but...

    By the time he, perhaps having graduated and gainful employment, sought a quotation in his own name, the three or so years he had been driving accident and conviction free would be taken into consideration and he would enjoy a lower risk status and a substantially more affordable quote.

    You have elements of this in the proposals you outline. If the son screws up, both his father is penalised, the poor old sod losing his hard earned NCD, and the son who would now have a higher insurance risk rating and probably a black eye to boot.

    I can't understand why the system that tested my father's faith but got us three boys on the road is now illegal.

    It was our broker (because we all went on to insure with Britannic as well) that advised us. I always remember him sitting with his head in his hands in our lounge saying, 'Tommy, Tommy. Why do you insist on buying cars like these?' referring to the V8 MG I had just bought.

    Like I said, he was almost part of the family starting off with just one policy and ending up with five when our much younger sister came of age. He made it easier for us to get on the road, his fatherly approach making us well aware of the financial risk to our own father, a parent willing to accept responsibility for the conduct of his offspring if we messed up.

    Sadly the broker is long dead, as is my father and the personal service we once enjoyed, a broker able to eye up a potential client and allow a subjective judgement to affect his decision as much a part of history.

    Now we are graded not by the impression we give a fellow human being, but by emotionless ticks on electronic forms. We are reduced to the zeros and ones of a computerised bank of statistics, victims of a post code and gender lottery and, of course, venal insurance companies.

    As you have so eloquently explained, things are different. So different in fact, that I recently received a plea for help from my sister and doshed out £1800 to insure my nephew's first car for him. He had saved up for the car himself out of the meagre residue left after paying his bus fares. Without his own car, he would remain trapped in the economic conundrum so many face, that of having to expend one's income in entirety, just so that one can work.

    As Kommandant Von Luger in the 'Great Escape' remarked in reference to the numerous escape attempts that had placed 'all his rotten eggs in one basket',

    'Gentlemen, this is close to insanity...'

  3. I'm sure you'll be glad the European Law are banning sex discrimination on car insurance. A 18 year old bloke who passes his test and gets his first car shouldn't have to pay much more than a woman of the same age and experience. It is sexist and the statistics are irrelevant. This will be a thing of the past.

    I do also agree with you is that there on how people should be charged on their insurance quote. Based on how clean their licenses are; history of driving offences, convictions, points on license, etc. Insurers are more likely to find out who's a bigger risk than basing it on how long ago someone who's had a prang.