Have you seen some large insurance renewal premium increases for your daily car?

Insurance premium rises target older drivers
The petrolprices.com website ran a news item on 29th September 2017 questioning whether this premium increases are:
> Unfair opportunism by insurers taking advantage of a group (older drivers) with previously lower premiums
> An increase justified for older drivers - are they simply more of a danger on our roads?
See the article

Car insurance costs accelerate 14.6% in a year rising five times faster than inflation - and older drivers have seen biggest increases
An article by Rebecca Rutt on the thismoney.co.uk website on 21st September 2017 provided some useful information. More

Let us know what your insurance renewal experience has been
We have an easy to use A4P survey form in Word format which will take only a few minutes to complete. Any information you provide will be handled in a strictly confidential way. All survey participants will receive a copy of our report on the information we see from fellow members' recent insurance renewal experience some 7 days ahead of its release to fellow V8 Register members.
Insurance renewal survey form

Posted: 171002

Recently a V8 Register member received the annual renewal notice from his broker for the motor insurance cover for his daily car and was astonished to see the premium had increased from £352.61 to £574.02 - an increase of £194.41 or 55%. As nothing had changed in terms of the risk or his driving record, naturally he could not understand why there was such a massive increase so he queried the renewal premium with his broker.

The broker replied "I appreciate this is still a sizeable increase however there have been some heavy market influences. Unfortunately, due to UK Government changes, there have been some rather hefty increases in the market this year. There is very little we can do about that I'm afraid because if an insurer is forced into paying claims at a higher rate than it has had to in the past, they have to pass that on. This is because the premium income of the many pay for the losses of the few essentially meaning there has to be enough premium in the pot to pay the inflated price of claims.

The legislation I am referring to relates to the "Ogden table" increases which are well documented in the press. These tables are used to calculate how much money has to be paid out in the case of personal injury claims. Historically insurers could discount the amount of money to pay out by 2.5% to take into account compound interest rates as it was assumed that any monies would be invested with the growth adding to the initial compensation. This has been changed practically overnight by a Government minister, to minus 0.75% which has increased the cost of personal injury pay-outs by over 3%. Some may argue that rates should then only go up by 3% however as personal injury claims outstrip payments for any other loss, this doesn't work.

For example if an insurer had to previously pay out £1,000,000 in a personal injury claim, they are now paying out in excess of an additional £30,000 more than previously. That increased premium has to be found somewhere as it is too large a sum for the insurers to sustain and remain within their regulatory obligation for capital adequacy. If you then multiply the £30,000 by the number of personal injury claims there are, the number is astronomical. I'm sure you will understand that it takes a lot of individual premiums just to make up the increase, never mind the initial layout.

For once I have to defend the market I work in as they had no influence or choice in the matter - this was governmental and ill-thought out I'm afraid. Additionally, the Government have increased Insurance Premium Tax (IPT) and the amount we have to pay into the FCA and the compensation scheme"

Far from convinced by this reply the member decided to "shop around" as a check - not something he had done or had wanted to do for many years, having felt previous renewal increases were relatively modest and preferring to remain with the same insurer and broker. Well a quotation from a leading insurer produced a premium for the same cover of £352.00 far lower than the renewal quote above! He was baffled as to what was going on.

What are the views of a consumer intelligence expert?
John Blevins, Consumer Intelligence pricing expert, has said: 'prices are stabilising but the future is unclear with the new Ogden rate, whiplash reforms and the possibility of another Insurance Premium Tax rise in the Autumn Budget next month.

Car insurance claim costs have increased in the past three months, partly because we are driving more technologically advanced cars which cost more to repair, but also because the weakness of the pound means the cost of parts is rising. Older drivers are being hit with higher premiums because they are driving for longer and consequently becoming involved in more accidents.

Hiking the rate of Insurance Premium Tax (IPT) three times in two years has also been blamed for rising motor insurance costs. On 1st June 2017 there was a rise to 12 per cent from 10 per cent, the third hike in two years. This follows on from a rise from six per cent to 9.5 per cent in July 2015, and then up to 10 per cent in March 2016. IPT is a tax on insurers and is added to general insurance products such as car, home and pet cover. This cost has largely been passed onto those taking out policies.

What is the Ogden discount rate?
When a court decides how much money will be paid out in a severe personal injury claim after a motor accident, it uses this discount rate to decide how much interest the money would earn if it was invested. The calculation, also known as the Ogden discount, is designed to make sure claimants are not under or overpaid. Until 20th March, it hadn't changed since 2001.

The pay-out must put the victim in the same financial position as if they had not been involved in the accident, and should be enough to fund any loss of earnings and any care costs for the rest of their lives. The discount rate assumes that if a person invested the lump sum they were given, they would put it in a low-risk investment - this safe, interest-paying investment is considered to be UK Government bonds. If a claimant chooses to take the lump sum as cash, instead of investing the money given to them, the discount is applied to that amount of money.
The change from 2.5 per cent to -0.75 per cent now assumes that instead of an investment making a 2.5 per cent return, it will now decrease over the claimant's lifetime. However, the yield on ten-year UK gilts is currently 1.182 per cent, while the FTSE All-Share stock market index's dividend yield is 3.48 per cent. The Association of British Insurers (ABI) said in practice most people who invested a lump sum would seek professional financial advice and invest in a mixture of investments and the rate needs to reflect this. The UK Government's latest proposal will see the discount rate changed again, which should help stabilise rising prices.

Modest survey
To try and assess fellow members' renewal experiences and whether they have seen any major increases, we are running a modest survey and would welcome your participation. We welcome your motor insurance renewal experience with your daily cars. Using the form available via the link below you can send in details of your renewal premium and experience. The information you provide will remain confidential. Do participate in the survey so we can get a wider view of the renewals situation. A report will follow with interim feedback too and all survey participants will be sent a copy by email 7 days ahead of its release to fellow V8 Register members.
Insurance renewal survey form

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