A number of insurance companies are omitting vital elements of their car insurance cover which previously came as standard. Things such breakdown cover and legal protection are all going out of the window as car insurance companies desperately attempt to reduce expenditures in order to remain profitable.
We therefore take a look at the reasons for this and provide advice for motorists on how to adapt to the changes in the car insurance market.
Reasons for the price increases Although it is easy to attribute the financial struggles of the insurance companies solely on the global recession, there are two specific factors that have brought about this change in their behaviour.
According to the Association of British Insurers (ABI), fraudulent claims cost the British car insurance industry £919 million ($1.5 billion) in 2010 alone. When it is considered that most insurers have global operations, the total cost of fraudulent claims per year is astronomical.
Uninsured drivers are another cause of concern for car insurance companies, with the Motor Insurers Bureau (MIB) estimating that insurance companies lost an additional £500 ($825) million of potential income from motorists who were operating on the roads with adequate insurance cover.
The impact of price rises Both of these factors together result in a combined loss of £1.4 billion ($2.3 billion), which has been enough to ensure that many insurance companies have been unprofitable over the past 12 months.
In an attempt to reverse this situation many insurers have attempted to reduce expenditures by remove vital elements of their insurance packages, such as breakdown cover and legal protection, which previously came as standard. Legal protection in particular has become a huge liability for insurers due to the number of fraudulent claims being made and an increase in offers of ‘no win, no fee’ legal services.
Additional features such as these which previously came as standard have been removed in renewal offers, with many insurers having failed to highlight this fact to customers. This ultimately means that a number of motorists are now driving oblivious to the fact that they are not as well protected as what they once were. Of course this is also on top of basic insurance price rises, with the AA estimating that the average driver is now paying £892 ($1,478) per year for car insurance premiums; an increase of 40% on the previous 12 months.
Adapt to the changing insurance market However, it is still possible to get everything you require from your car insurance policy without paying over the odds. Of course the key piece of advice is to shop around and compare car insurance quotes available through as many different insurance companies as possible.
