Why has my car insurance premium increased?
30/08/2018 It can be quite the unnerving experience when you are blindsided by a steep increase in your premium.
Economically, 2018 has been a rollercoaster ride for consumers and the insurance world is no different. Depending on how the economy performs for instance, your premium increases may also fluctuate. But while your car premium increase can be explained away by factors that are beyond your control, it can also be largely affected by your behaviour and choices.
Excess: If you choose to lower your excess at any given time, your car insurance premium will most likely increase. Similarly, electing to pay a higher excess will help reduce your premium.
Claim frequency: Depending on your insurer, the more you claim, the more likely it is that your premium will be increased when you renew your policy. In addition, the severity of the accidents you are involved in and your level of responsibility or negligence (outcome of the assessment of the incidents) will play a part in the upward adjustment.
Changes in your details: If the regular driver of your car changes or you move to a busier area for instance, your premium might change because these factors will affect your risk profile. For instance, younger drivers are considered to have a higher risk profile and thus pay a higher premium.
Car safety: Although it is unlikely, but if you were to remove your car’s tracking device or immobiliser, or if, unlike your previous residence, your new house doesn’t have a locked garage, your insurer may increase your premium.
Your car’s value and how it affects your premium
It’s a contentious issue as to whether your premiums should be increasing if your car value is decreasing. Some would argue that the cost to your insurer, taking into account factors like inflation, may actually be increasing every year, irrespective of the total value of your car. One such insurer that has based its business model on car insurance premiums decreasing because the value of your car is decreasing is King Price insurance.
Some would, however, argue that the cost to your insurer, taking into account factors like inflation, may actually be increasing every year, irrespective of the total value of your car. The cost of replacing a bumper or any other car part is the same for a brand new car and a five year old car. However there is no hard and fast rule here! The amount that you will be paid out for your car insured at retail value will decrease from one year to the next so there is no reason why you shouldn’t contact your insurer and see if you can renegotiate your premium.
What are my options after an increase?
- Contact your insurer and negotiate. Most insurers are open to negotiating a lower increase in your premium. But this may require you to, for example, increase your excess.
- Lodge a formal complaint. Sometimes your premium increase is a matter of a technical error. If you don’t agree with the adjustment to your premium, enquire about it with your insurer. You should be refunded the difference if it turns out to be an error.
- Improve your car’s safety. Install a tracking device if you don’t have one or upgrade your current device.
- Consider removing some added benefits from your cover. Additional benefits like car hire may not be a need for you. However, it will disadvantage you if you damaged your car and needed to get around.
- Shop around for a better deal. If you can find better cover, you should move house. However, sometimes a long-standing relationship with your insurer may help you with future negotiations.
How the economy and legislation impact on your premium
When insurers incur increasing costs, they try to pass some of those costs onto consumers. The floods and storms we experienced this year may have increased the number of claims received by insurers. Meaning they had to pay out a lot more money than anticipated. For example, many people’s cars were damaged by flash floods and had to be written-off. The replacement cost of car parts of these damaged vehicles and other insured items that were swept away would also be higher because of the VAT hike. To recoup some of these funds, the cost is spread across consumers’ either immediately or put off and charged as a renewal premium.
Similarly, when new stricter legislation is introduced, insurers sometimes incur compliance costs. For instance if new legislation requires insurers to cover you for a longer period after the cancellation of your policy then your risk profile is affected as the possibility of claiming increases. And as we’ve highlighted, a higher risk equals a higher premium.
Cancelling your car insurance policy altogether is an extreme way to deal with the increasing cost of living. Instead of risking being uninsured on a rainy day, rather opt to review your policy and adjust it to better suit your changing lifestyle.
Also shop around if there is no way around a hefty increase, there are a number of insurers out there. OUTsurance even pays out if they can’t beat what you are currently paying for car insurance and Hippo provides you with multiple insurance quotes online. It’s always worth exploring. Maybe your current insurer will match another car insurance quote you receive, that way you have peace of mind knowing you are covered at the best possible rates!