A report by Reuters today shows that car insurance premiums fell by 1 percent in the third quarter of 2019. That may not sound much, but given the millions of vehicles on the road across Britain, it adds up to a lot of cash. Reuters identifies three interesting factors at play; changes to the Ogden rate, environmental concerns causing fewer journeys and a slight reduction in the number of cars on the roads.
All of these are valid reasons, to which Insurance Edge would add that a growing section of the UK population no longer see any point in obeying the law and insuring their cars. The penalty for non compliance is often far less than paying the premium, typically a fine of about 400-600 pounds, plus the seizure of your Gumtree car. Another banger can be sourced for under 500 pounds – so why pay 2K a year insurance?
The other point we would make is the growing rejection of car ownership full stop, by a band of younger consumers. Many under-35s live in cities that are completely against cars; residents parking schemes, emissions charges, more parking charges for parking at work. Add that onto fuel, depreciation and servicing costs and it’s easy to see the attraction of a 1K racing bicycle plus a buzzboard instead, with perhaps the odd car-sharing rental during the holidays thrown in.
It isn’t so much that younger consumers are essentially greener, it’s just that the car is not the practical solution to personal transport, or the alternative to smelly, unreliable public transport, that it once was, unless you live in a very rural area.
Here’s some reaction from Manan Sagar, CTO for insurance at Fujitsu, who commented on the news:
“The fall in car insurance premiums is a worrying sign for the industry and signals a need for change in the general insurance pricing practices. The industry is only at the beginning of its gradual transformation; and while previously insurance premiums were calculated based on a partnership of three stakeholders: the client, the broker, and the insurer, there’s now a fourth player involved: the tech provider who can process, analyse and deliver the data to better calculate and manage the policy.
“The focus on precision and prevention can help reduce insurance costs by as much as 50% on an on-going basis, not just in the first year. This will not just help the millions of loyal customers who do not switch each year, but will make the society safer. So far, insurers’ response to changing customer behaviour and demand for digital offerings, such as automation, has typically been a slow process.
The digital age has ushered an incredible opportunity for insurers to evolve the very purpose of the industry – challenging their mindset and shifting business models to focus on prevention, rather than a reaction to an incident could help to push the cost of premiums down. Ultimately, by implementing new technologies, organisations will be able to make car insurance fairer for both new and existing customers.”