Straight talking from the Editor’s laptop. This time round it’s the fundamental changes in car ownership vs leasing, and the insurance industry’s insistence on continuing with the same old TPF&T or Fully Comp options, that’s upset his cup of mocha.
I recently had the pleasure of renewing my car insurance on my Alfa Spider. The main pleasure was saving about £120 a year, switching from Swiftcover to LV, using the Meerkats comparison site.
It’s a traditional type of car insurance transaction, but the market is changing at a rapid pace, and this business model of persuading car owners to set aside two hours of our time filling in forms, phoning an existing provider to cancel and then getting emails three days later from slower brokers, who have miraculously found a great quote, is on the way out.
There are three big factors at work here;
Growth of renting instead of owning stuff, full stop.
Anti-car policies across UK cities
On-demand PAYG insurance, with risk assessed by telematics, not postcodes
THE NETFLIX GERMAN CAR, YOURS FOR £299 PM
Firstly, look at the switch to renting cars. 90 percent of all new car deals involve finance, usually a PCP contract where the `owner’ hands back the car after three or four years. The real risk here is not the car value, but the contract value – what will the renter have to pay if the car is stolen, or written off? It could be that the market value of the car is way below the actual cost of the PCP finance plus the final payment.
There’s a huge opportunity for brokers or MGAs to offer a very simple, app-calculator type policy, that let’s you choose the right level of cover, and then decrease the premiums as the debt reduces over time.
It’s worth noting that many car renters have another car in their household, which often clocks up the riskier mileage doing school runs, shopping trips and local tip runs, rather than the `Sunday Best’ car, which has a cap of say 8K miles per year on it. So it isn’t always about postcodes, occupations, or claims history. In reality, the big risk to the PCP car is that someone might want to steal it because it’s a prestige vehicle, rather than that car suffer an accident on the road or a bump in a Tesco car park.
So shouldn’t the quote reflect that true risk, and any steps the renter has taken to prevent pro thieves, such as a tracker device, or old fashioned steering lock?
COUNCILS HATE CARS, BUT NEED CASH AS THE HIGH STREET COLLAPSES
There can be little doubt that many cities are watching the Khan revenue experiment with ULEZ with a great deal of interest. The great thing about ULEZ and emissions related congestion charges, is that they may well replace the cash which local councils used to enjoy from businesses based on High Streets. So you can bet more councils will seek to impose those charges on anyone driving a car into a town or city centre.
If you work in a town centre, then you’ll have to either buy/rent a new car, or use unreliable, dirty, smelly, jam-packed public transport. So as councils slap these taxes on commuters simply attending workplaces, or those crazy types who enjoy face-to-face shopping, expect more ride-sharing, more electric vehicles and therefore more demand for PAYG insurance.
The notion that old school annual, 12000 mile, Fully Comp policies will fit this type of car usage is nonsense. What we need is cover that kicks in for each driver, as and when they need to use a shared vehicle, with risk calculated on traffic flow, accident data en route, theft/vandalism risk by parking area, driver history & behaviour tracked via telematics.
Go to it BIBA Hackathon teams, because this is a product that people in the real world actually want, and will need in the future as the car market shifts profoundly.
SUNDAY RIDE MOTORCYCLES DON’T NEED 365 DAY COVER
As a footnote, can I plead with someone in the motorcycle insurance market to activate a common sense light bulb and bin off the utterly useless insurance products that are currently being sold to a 80% Sunday leisure rising market? Most bikers are aged 50 plus, ride under 3K per year, mainly on sunny weekends and their motorbikes are locked away on an Optimate charger 5 days a week.
So why can’t the industry create a policy that offers laid up cover, and ONLY offers fully comp when the bike is actually being ridden? Again modern machines can have tracker/telematics devices fitted so the insurer knows exactly where the machine is, and how it’s being used.
The insurance industry also needs to consign the old fashioned Norwich Union insurance grouping system into the dustbin of history. How is a 1997 Fireblade a greater risk in busy London traffic than a new Vespa 125 scooter? The PI risk – to rider and pedestrians – is identical, and that injury claim represents the greatest possible loss to the insurer.
Replace insurance groups with trackable usage, shared owership pay-per-mile cover, PCP finance gap cover, AI-powered rider coaching & more. App-based, self managed on a smartphone – let bikers choose the cover they actually need, not the cover the industry THINKS they need.
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