From the Editor’s keyboard;
Peak car ownership in the UK was probably about a decade ago and by ownership I mean people actually buying a car, not leasing one for three or four years and then chopping it in against a new model. Yet a quick search online for car insurance reveals the industry is essentially stuck in the 1990s, offering outdated Fully Comp or TPF&T policy options, with a stack of questions about commuting, jobs and overnight parking locations seemingly more important than NCD or actual vehicle usage.
A recent article in The Sun identified that the number of 17 year olds taking the UK driving test has fallen by 80,000 in a decade. Hardly surprising given the low wages offered by the very few employers willing to hire anyone under 18. Add in the typical £4000-£5000 annual premium for insurance and you can see why teenagers, and some twenty-somethings, have pretty much given up on car ownership as a bad idea.
But older drivers are also using their cars less, as both governments and local councils enact anti-car policies designed to make life difficult for anyone using a car, van or motorcycle in an urban centre.
Apart from killing off town centre retail even faster, this is also making drivers use cars for special family or leisure trips, social events where public transport isn’t a safe option – especially for women – or simply to ferry grown-up children around. Commuting remains the biggest single type of usage for the majority of car drivers, but as the public sector begins to shift to a four day work pattern, with more flexible working via laptop or tablet becoming the norm, that will inevitably decline too.
PAYG IS THE NEW FULLY COMP
The solution to this fundamental shift in the way we use our (mainly rented) cars is to offer PAYG policies which use technology to accurately assess the risk factors involved. For example a regular commute, with a school drop off at the start of the journey is a high stress journey, undertaken when the driver may be sleepy or just fed up with life in general. Add in a great number of other, similarly stressed-out drivers sharing the same road space and you can see that this is a high risk journey, particularly in winter weather conditions.
A driver on flexi-time, or working shifts that start at say 12 noon has a more relaxed journey and may well be in a sharper mental state. There’s less traffic to contend with too. The exception to this rule would be on Saturdays, near a city centre or major retail Mall, where drivers are again competing for parking spaces, and minimising journey times as they seek to maximise their leisure hours at the weekend.
The industry can obtain data from roadside cameras, scheduled roadworks projects, live traffic reports via the media, Met Office weather updates for all regions of the UK and much more.
Now all these factors can be assessed by modern technology. New cars have a plethora of electronics which show the location, activate the emergency services and FNOL with the insurer should an accident occur. Algorithms can gauge the theft or vandalism risk, street by street, or by public car park fender-bender incident. So say your broker software lets you know that the Trafford Centre or Bicester Village generally sees a spike in minor collisions between November 28th-December 5th, you can adjust the PAYG mileage premium for anyone making that journey.
Maybe the data patterns suggest those who travel with young children in their car generally travel slower, park in places where the baby-seat/buggy kerfuffle is easier to accomplish and buy or rent vehicles with a high NCAP safety rating. Isn’t that part of the lifestyle equation more important than the on-street overnight parking factor?
LEASED CARS DON’T DO BIG MILES
It’s an undeniable truth that rented cars simply do not clock up the same miles as those owned outright by people. Most contracts have mileage caps and the costs for exceeding them are pricey, so the industry needs to catch up to this new reality very quickly. The second car in the household, the one that isn’t being rented is the one which is generally used for high risk journeys like commuting. It tends to be a banger, aged over 8 years, and serviced via non-dealership facilities on a `need-to-fix-for-MoT’ basis.
These vehicles are the real high risk cars people! Not the immaculately valeted BMW that costs £370 per month and only gets used on Sundays and holiday trips to Center Parcs. The dented Peugeot 308s, battered Qashqais, the Focus 1.6 hatchbacks with footwells full of Burger King wrappers – these cars are driven into the ground, hammered around town until the shocks are thumped to death by pot-holes and clutches fried by endless school runs.
Develop car insurance that is truly built around the lifestyle, car care and driving habits of the insured person, not the car’s engine size, or the occupation of the driver. Offer PAYG cover with discounts – real discounts – not a token £50-£70 a year, for those who fit a black box and obey the speed limits and don’t drive like they’re on a Top Gear lap in a reasonably priced car.
Finally, a quick word about motorcycles; bikers don’t usually ride a bike 5 days a week to work, unless it’s aboard a small 125. Most over 600cc bikes are Sunday toys – so why are bikers buying Fully Comp policies, what on earth is the point of having road use cover on a wet Tuesday when no 50-something biker is actually going to consider riding that day? Again, PAYG app cover, with an option to tick the pillion box for each journey.
If the industry doesn’t change its rigid, take-it-or-leave-it Fully Comp/TPF&T policy attitude, then car insurance as a product will begin to wither and die. More drivers at the lower end of the economy will simply drive uninsured, as they do the maths and realise the risk of being stopped and having a £600 Ford Fiesta from Gumtree seized, plus a £400 fine, is way cheaper than the insurance on said Fiesta.
Car insurance is an important part of modern society, because it allows people to travel and feel there is some back-up if things go wrong. When you make that security blanket unaffordable for a large minority of the population you invite the law of the jungle to replace the law of the land. Not good.
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