And how do we get the best price available?
As someone who works in the industry, I am fully aware of the stigma that is sometimes associated with insurance - mostly personal insurance policies, such as car, home or travel insurances. It is common place on social networks, chatrooms, forum sites, and in general chit chat amongst friends for the subject of insurance to arise at some point, whether this be related to price, a recommendation, or a complaint about a claim etc. I think we have all had our renewal come through and gasped at the increase...only to find your insurance company will reduce the price in alot of cases if you call them to complain about it...! So what are the reasons for this....?
The methods used to calculate insurance are complex, but i will attempt to briefly explain the mechanics behind the underwriting and the marketing practices used by insurance companies and brokers in the car insurance market today.
Ok, so essentially, insurance is a business like every other, they are designed to make a profit - lets assume for this exercise that an insurer does not earn any additional income other than that from insurance premiums alone, ie no investment returns, cross selling etc - this is classed as "underwriting profit".
Lets also assume that 100 people want to insure their car (they want to pass the risk of any financial loss associated with their car to another party) - all of them pay £200 for one year - the insurer collects £20,000 premium. Essentially, to make money, the insurer does not want admin costs, or the costs of claims to exceed £20,000 in one year. Lets say two of these people have a crash with a couple of other third parties and it is their fault - even minor incidents are likely to cost the insurer a considerable amount, but if the claims involved personal injuries, which many do these days, the costs of these claims may easily top £20,000 each.
Lets take the £20,000 each claim for this example, which means the insurer has paid out £40,000 - next year - the insurer is going to have to charge each person £400 and hope it doesnt have any claims (even then it will only have recouped the cost of last years claims and will break even).
It is worth noting at this point that the car insurance market as a whole has not made an underwriting profit for over ten years!! - this means that your car insurance is still too cheap! Whattt?? i hear you say.....that cant be true...!?
Unfortunately it is - insurers discount the true underwriting premium in order to gain market share, which is why you are always going to get a cheaper price when first joining a company - the company know they wont make money off the car insurance premium itself, but they will try to cross sell Breakdown, or Legal Expenses to make some money back. Then at renewal, you will find your price goes up to something more in line with what the insurer needs to charge to make money.
Ok, so now lets take a close look at what is going to happen to your car insurance premium over the next couple of years - claims costs are rising, costs of parts, solicitors fees, admin fees, all mean the average cost of a claim is always rising with inflation. In addition to this, there are more cars on the roads now than ever before, there are more cases of fraudulent claims, exagerrated claims, and uninsured drivers (uninsured drivers add around £25 to your insurance premium every year). Personal injury claims are more frequent, and the payouts higher....can you see where i am going with this....
Essentially, your car insurance will probably rise this year, by as much as 10-20% - and will possibly continue to do so next year - ultimately, the only thing that can be done to prevent future rises, are for drivers to be more careful on the roads.
However, individually, there are a few things you can do to keep the cost of your insurance down:
1. If you are Third Party Fire and Theft - get a quote for Comprehensive cover - these policies are sometimes cheaper
2. Try adding your Spouse to the policy - insurers give discounts for Insured and Spouse Drivers
3. Estimate at a lower mileage per annum - obviously if you are going to go over it you will be obliged to tell your insurer when you get close to the declared limit
4. Shop around at renewal - however, always be careful of excesses and cover offered - generally you get what you pay for - the same applies to an insurance policy
5. If you are prepared to pay a slightly higher voluntary excess, you will get a small discount off your premium, but have to pay more in the event of a claim
6. As the very last available option....get a smaller engined car!
Tuesday 17 September 2013
Monday 16 May 2011
The Average Clause
"I did not insure my property fully and was penalised by my insurers!"
"I forgot to add some additional items I bought onto my household policy and then my claim payment was reduced"
"What happens if I do not insure the value of my property properly?"
I am sure most of you will have heard at least one of the above statements in your years of dealing with either your house, let property or business insurance. Some of you may have had your own claim payments reduced because of these reasons and are feeling a little hard done by...
So for those of you that dont know what the average clause is, let me explain; the average clause is a condition written into most property insurance contracts which simply means insurers are entitled to reduce claim payments if the risk has not been insured to its full value.
The proper insurance definition is "If an average clause applies to your policy and your property is under-insured, the insurer may – in the event of a claim – reduce the amount of the settlement in proportion that reflects the under-insurance"
You may feel this is just a typical insurer clause so they can get out of paying money I hear some of you say - however it isn't; put yourself in the insurers position for one moment - I as a customer ask you to insure my house for £50,000, you agree to take on this risk, but you want £100 for doing so (your insurance premium). A few months later, a fire burns down my house and it costs £100,000 to rebuild - I approach you as my insurer and say "where's my £100,000 to re-build my house?".....what would you say....???
The answer would be, "I shall give you £50,000 as that is what you asked me to insure the house for, however, if you had asked me to insure your property for £100,000 I would have asked for £200, and since you have only paid me half the money, I shall pay half your claim"
Obviously, had the property been insured for £75,000, and the appropriate premium paid, then that amount would have been the claim payment.
There are two key lessons to be learned here, nay three;
firstly, ensure you get your sums insured correct, both contents, buildings, stock, or any other property, get valuations done if necessary,. or simply go round each room totalling up the value to give you a rough idea;
secondly, never forget that an insurance contract is just that - its a contract, a legal document - and it should be treated as one; you have seen the policy booklets, they are there for a reason - I am sure you didnt just sign the documents when buying the house itself... why risk it by not reading the fine print of the contract which protects your investment??
and finally, if you dont want to spend time reading the fine print, buy your insurance through a broker - they will give you all the help and advice you need, and provide substantially better value for money when buying insurance.
"I forgot to add some additional items I bought onto my household policy and then my claim payment was reduced"
"What happens if I do not insure the value of my property properly?"
I am sure most of you will have heard at least one of the above statements in your years of dealing with either your house, let property or business insurance. Some of you may have had your own claim payments reduced because of these reasons and are feeling a little hard done by...
So for those of you that dont know what the average clause is, let me explain; the average clause is a condition written into most property insurance contracts which simply means insurers are entitled to reduce claim payments if the risk has not been insured to its full value.
The proper insurance definition is "If an average clause applies to your policy and your property is under-insured, the insurer may – in the event of a claim – reduce the amount of the settlement in proportion that reflects the under-insurance"
You may feel this is just a typical insurer clause so they can get out of paying money I hear some of you say - however it isn't; put yourself in the insurers position for one moment - I as a customer ask you to insure my house for £50,000, you agree to take on this risk, but you want £100 for doing so (your insurance premium). A few months later, a fire burns down my house and it costs £100,000 to rebuild - I approach you as my insurer and say "where's my £100,000 to re-build my house?".....what would you say....???
The answer would be, "I shall give you £50,000 as that is what you asked me to insure the house for, however, if you had asked me to insure your property for £100,000 I would have asked for £200, and since you have only paid me half the money, I shall pay half your claim"
Obviously, had the property been insured for £75,000, and the appropriate premium paid, then that amount would have been the claim payment.
There are two key lessons to be learned here, nay three;
firstly, ensure you get your sums insured correct, both contents, buildings, stock, or any other property, get valuations done if necessary,. or simply go round each room totalling up the value to give you a rough idea;
secondly, never forget that an insurance contract is just that - its a contract, a legal document - and it should be treated as one; you have seen the policy booklets, they are there for a reason - I am sure you didnt just sign the documents when buying the house itself... why risk it by not reading the fine print of the contract which protects your investment??
and finally, if you dont want to spend time reading the fine print, buy your insurance through a broker - they will give you all the help and advice you need, and provide substantially better value for money when buying insurance.
The Average Clause in Property Insurance
"I did not insure my property fully and was penalised by my insurers!"
"I forgot to add some additional items I bought onto my household policy and then my claim payment was reduced"
"What happens if I do not insure the value of my property properly?"
I am sure most of you will have heard at least one of the above statements in your years of dealing with either your house, let property or business insurance. Some of you may have had your own claim payments reduced because of these reasons and are feeling a little hard done by...
So for those of you that dont know what the average clause is, let me explain; the average clause is a condition written into most property insurance contracts which simply means insurers are entitled to reduce claim payments if the risk has not been insured to its full value.
The proper insurance definition is "If an average clause applies to your policy and your property is under-insured, the insurer may – in the event of a claim – reduce the amount of the settlement in proportion that reflects the under-insurance"
You may feel this is just a typical insurer clause so they can get out of paying money I hear some of you say - however it isn't; put yourself in the insurers position for one moment - I as a customer ask you to insure my house for £50,000, you agree to take on this risk, but you want £100 for doing so (your insurance premium). A few months later, a fire burns down my house and it costs £100,000 to rebuild - I approach you as my insurer and say "where's my £100,000 to re-build my house?".....what would you say....???
The answer would be, "I shall give you £50,000 as that is what you asked me to insure the house for, however, if you had asked me to insure your property for £100,000 I would have asked for £200, and since you have only paid me half the money, I shall pay half your claim"
Obviously, had the property been insured for £75,000, and the appropriate premium paid, then that amount would have been the claim payment.
There are two key lessons to be learned here, nay three;
firstly, ensure you get your sums insured correct, both contents, buildings, stock, or any other property, get valuations done if necessary,. or simply go round each room totalling up the value to give you a rough idea;
secondly, never forget that an insurance contract is just that - its a contract, a legal document - and it should be treated as one; you have seen the policy booklets, they are there for a reason - I am sure you didnt just sign the documents when buying the house itself... why risk it by not reading the fine print of the contract which protects your investment??
and finally, if you dont want to spend time reading the fine print, buy your insurance through a broker - they will give you all the help and advice you need, and provide substantially better value for money when buying insurance.
"I forgot to add some additional items I bought onto my household policy and then my claim payment was reduced"
"What happens if I do not insure the value of my property properly?"
I am sure most of you will have heard at least one of the above statements in your years of dealing with either your house, let property or business insurance. Some of you may have had your own claim payments reduced because of these reasons and are feeling a little hard done by...
So for those of you that dont know what the average clause is, let me explain; the average clause is a condition written into most property insurance contracts which simply means insurers are entitled to reduce claim payments if the risk has not been insured to its full value.
The proper insurance definition is "If an average clause applies to your policy and your property is under-insured, the insurer may – in the event of a claim – reduce the amount of the settlement in proportion that reflects the under-insurance"
You may feel this is just a typical insurer clause so they can get out of paying money I hear some of you say - however it isn't; put yourself in the insurers position for one moment - I as a customer ask you to insure my house for £50,000, you agree to take on this risk, but you want £100 for doing so (your insurance premium). A few months later, a fire burns down my house and it costs £100,000 to rebuild - I approach you as my insurer and say "where's my £100,000 to re-build my house?".....what would you say....???
The answer would be, "I shall give you £50,000 as that is what you asked me to insure the house for, however, if you had asked me to insure your property for £100,000 I would have asked for £200, and since you have only paid me half the money, I shall pay half your claim"
Obviously, had the property been insured for £75,000, and the appropriate premium paid, then that amount would have been the claim payment.
There are two key lessons to be learned here, nay three;
firstly, ensure you get your sums insured correct, both contents, buildings, stock, or any other property, get valuations done if necessary,. or simply go round each room totalling up the value to give you a rough idea;
secondly, never forget that an insurance contract is just that - its a contract, a legal document - and it should be treated as one; you have seen the policy booklets, they are there for a reason - I am sure you didnt just sign the documents when buying the house itself... why risk it by not reading the fine print of the contract which protects your investment??
and finally, if you dont want to spend time reading the fine print, buy your insurance through a broker - they will give you all the help and advice you need, and provide substantially better value for money when buying insurance.
Monday 14 March 2011
UK Insurance Adviser: Why has my car insurance premium gone up? Tips to ...
UK Insurance Adviser: Why has my car insurance premium gone up? Tips to ...: "And how do we get the best price available? As someone who works in the industry, I am fully aware of the stigma that is sometimes associat..."
Wednesday 9 February 2011
Car insurance, home insurance, travel insurance and business insurance advice: Why has my car insurance premium gone up? Tips to ...
Car insurance, home insurance, travel insurance and business insurance advice: Why has my car insurance premium gone up? Tips to ...: "And how do we get the best price available? As someone who works in the industry, I am fully aware of the stigma that is sometimes associat..."
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