# Don't you think "car insurance" is just pretty much a scam?



## Kalahati (Oct 20, 2014)

I was thinking about this and while it's just an opinion, I think I may be somewhat correct.

Let's say Mr. Jones had an idiot who smashed in to his TT early morning and drove off leaving a £400 repair job to be carried out. Mr. Jones decided to go through his insurance as he believes this to be the conventional way of getting things done, I mean, it makes sense; buy car insurance, car damage ensues, claim on insurance.. done deal.

He has a £250 excess to pay which means he (in his case) saves £150 initially on the total repair bill of £400. Given that his yearly premium is £1000 the insurance company still in this situation has still made a profit from Mr. Jones. Through claiming Mr. Jones will now be black listed in some form that his next year insurance premium will go up as he will need to declare said incident for x amount of years as well as (in some cases) lose his 5 years no claims bonus he has built up hiking his current yearly premium by 40%.

So he paid £1000 for yearly premium, paid £250 for excess saving him £150 on the £400 repair bill. This leaves the insurance with £1250 of his hard earned money. His renewal comes through the door and finds that his premium is now £1450 and obviously the subsequent years after this will slowly drop in price but is still in excess of the original £1000. The profit margin for insurance groups is so huge it completely sends me indignant.

I know this situation is lacking a lot of real world circumstances but my effort here is to show how insurance groups have somehow made it impossible to actually ever claim; it leaves you with the decision of deciding whether its economically viable for you to do so, despite you already paying these clowns a lot of money in the first place.

Some of you may say that these premiums are worth it because some people cause major damage to vehicles/infrastructure and such, but to be honest the way these insurance companies work, they've priced their premiums in such a way that they will and always will be left with a substantial profit margin.. at our expense.

If I want to change my car on my policy I am usually kept waiting on an 0800 number consuming more money. I then need to explain to the person on the phone why I want to change my car. Once they approve they will charge me an admin fee for someone to pump a few keys on a keyboard. I am paying for that person to make changes on my insurance policy which I have or am already paying for. Let's assume each call is 10 minutes long. Typical admin fee is £15, so given that this man/woman does an 8 hour shift doing policy changes, he's earned the company £480 which is well beyond his salary for that shift which in turn is more profit for the insurance company.

Insurance companies pour all their money in to an account which generates massive amounts of interest, which they probably use to pay for claims so their money which is essentially ours is forever generating vast amounts of profits yet keeping their threshold where it needs to be or better yet far beyond it. This s*** should be a public service, not a money making scheme. No different from a footballer getting paid silly amounts of money whilst our contributions to the government to cover public services such as the NHS, Police and Firefighters and these poor humans get paid dismal amounts compared to a football kicker.

Rant over.


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## Kalahati (Oct 20, 2014)

To put it in to perspective there is an average of maybe 30 million cars on the road in the UK, not including lorries, bikes etc.

The average price of insurance for Q3 2014 is £582. Which is roughly a total combined premium of £17460000000 (seventeen billion four hundred sixty million) paid by licensed vehicle owners throughout a year. Surely this is way over the claims these insurance companies pay within that same amount of time..


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## Hilly10 (Feb 4, 2004)

If its a 0800 no its free :roll:


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## Spandex (Feb 20, 2009)

If you consider a single customer in isolation, paying an above average premium and making a low value claim, the numbers will never stack up. The whole point of insurance is to average out the repair costs over a large group of people, so that no single person is liable for a large individual payout.

And of course they're making a profit at our expense. that doesn't make them a scam, any more that it makes your local corner shop a scam.

Ultimately, our own greed is responsible for most of the problems with the car insurance industry. People see an accident as an opportunity to profit, maybe by getting a couple of extra panels resprayed, maybe getting a nice courtesy car to drive around in (because suddenly they're too good to be seen in an old Corsa or, heaven forbid, on the bus) and maybe they deserve a couple of grand for having a sore neck for day or two. People who do these things aren't screwing the insurance company - they'll just get the money straight back through higher premiums. No, insurance companies love paying out more for pointless stuff, because then they can charge even more and their net profit goes up.


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## Spandex (Feb 20, 2009)

Oh, and according to the statistics I've seen, the UK motoring insurance industry hasn't made an underwriting profit for 20 years. So yes, the total accident payouts do exceed the total premiums. That's not the whole story, of course, but it's not quite the license to print money that you suggest it is.


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## mullum (Sep 16, 2011)

This is just a theory.
You lie lie lie to get the cheapest quote possible. You don't mention mods, you say it's in a garage etc etc. You pay lets say £200 instead of £600. Of course it's invalid - but only AFTER an issue/claim/accident etc. 
You drive around for 5 years, insured as far as the cops are concerned, saving £2000.
You have some damage one day, cost is £1000. You don't claim, you pay yourself. You're still up £1000.

Sounds crazy, but bear in mind that the insurance company will always try to avoid a payout anyway. After a claim your policy would go up.

This is why I think there should be a base policy - a national government backed basic policy which is mandatory. It wouldn't include anything other than 3rd party - you'd add on (optionally) your own extras through a private scheme. So dependant on what you expect in return - you buy private insurance, declaring mods, courtesy car, legal cover etc etc.

I made a thread about this about 2 or 3 years ago.


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## Spandex (Feb 20, 2009)

mullum said:


> This is why I think there should be a base policy - a national government backed basic policy which is mandatory. It wouldn't include anything other than 3rd party - you'd add on (optionally) your own extras through a private scheme. So dependant on what you expect in return - you buy private insurance, declaring mods, courtesy car, legal cover etc etc.


Would this basic 3rd party policy cover the other cars occupants for personal injury? Would it cover their mods, their choice of courtesy car?


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## SalsredTT (Jan 8, 2011)

The number of UNinsured drivers on our roads tends to annoy me.


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## Skeee (Jun 9, 2009)

SalsredTT said:


> The number of UNinsured drivers on our roads tends to annoy me.


 Call me naive but hopefully this will come down now with ANPR checking the harmonised tax disc/insurance/MOT.



Hilly10 said:


> If its a 0800 no its free :roll:


 If you meant 0870/0845 etc then check this site first. http://www.saynoto0870.com/



Spandex said:


> ....................Ultimately, our own greed is responsible for most of the problems with the car insurance industry. People see an accident as an opportunity to profit, maybe by getting a couple of extra panels resprayed, maybe getting a nice courtesy car to drive around in (because suddenly they're too good to be seen in an old Corsa or, heaven forbid, on the bus) and maybe they deserve a couple of grand for having a sore neck for day or two............


 Maybe so, but if most felt insurance was value for money then most wouldn't do that.


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## Spandex (Feb 20, 2009)

Skeee said:


> Spandex said:
> 
> 
> > ....................Ultimately, our own greed is responsible for most of the problems with the car insurance industry. People see an accident as an opportunity to profit, maybe by getting a couple of extra panels resprayed, maybe getting a nice courtesy car to drive around in (because suddenly they're too good to be seen in an old Corsa or, heaven forbid, on the bus) and maybe they deserve a couple of grand for having a sore neck for day or two............
> ...


You're a lot more optimistic than I am. I don't believe people are 'crusading' against an unjust system when they try to screw it for a few quid, even if they use that excuse to try to justify it to themselves and others.

And no one will ever feel that insurance is value for money because peoples minds don't work like that. They don't see the value in protection from risk, when that risk hasn't transformed into an actual event. It's the same as buying a lottery ticket and losing - no one would say a losing ticked is value for money _after_ the draw, but they all felt £1 was a small price to pay for the chance of winning £150m _before_ the draw.


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## Kalahati (Oct 20, 2014)

My main gripe isn't so much the premium but rather how little the premium you've paid will get you when it comes the time to claim.


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## igotone (Mar 10, 2010)

Kalahati said:


> My main gripe isn't so much the premium but rather how little the premium you've paid will get you when it comes the time to claim.


To be fair, many people shop around for the cheapest insurance they can get, but like everything else in life - you get what you pay for in the event that you need to claim.


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## Shug750S (Feb 6, 2012)

Trouble is you might make a small mistake and hit a car seriously injuring the occupants / leaving them disabled and needing care for the rest of their lives, costing millions.

Your insurance company would cover this.

That's why 3rd party cover is a legal requirement and cops pull lots of cars who show up on their systems as not covered.

Everyone's free to shop around and you decide who you buy insurance from.


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## mullum (Sep 16, 2011)

Spandex said:


> mullum said:
> 
> 
> > This is why I think there should be a base policy - a national government backed basic policy which is mandatory. It wouldn't include anything other than 3rd party - you'd add on (optionally) your own extras through a private scheme. So dependant on what you expect in return - you buy private insurance, declaring mods, courtesy car, legal cover etc etc.
> ...


I'm making it up as I go along of course - but I'm thinking that the basic cover would provide the same level of cover that 3rd party insurance does now. To be honest I've no idea what that does or doesn't cover and I only hope I never need to know. But essentially - you'd be legally covered for the damage/injuries YOU CAUSE - as well as basic cover for yourself. You'd then top it up with a private scheme if you wanted your car covered (comprehensive) or you wanted any other frills/extras.

At least there'd be less uninsured drivers out there - everyone would be "covered" to drive. People with money would splash out and cover their expensive car, have a courtesy car etc. People without would risk the value of their car by just having basic cover, or they could top up to a level they can afford.

Of course its a massively complex issue/business so theres no way for me to present a completely water tight solution in a single forum post. Im sure it'd be easy to shoot holes through the idea, but they have something similar in Brazil. I don't actually know all of the details though, Im afraid.


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## Spandex (Feb 20, 2009)

The reason I asked is that it affects the savings you could make (potentially, if you chose to only pay for the base cover). I agree that the base policy would probably need to cover personal injury for the third party, but I suspect that because of this, once you factor everything in you wouldn't save a huge amount.

Remember, the basic policy would still have to take into account the driver, the car model and any performance modifications, as these would affect the risk profile.

At the end of the day, most people with half decent cars (and by that I just mean anything that's not a banger) will want some form of additional cover, and at that point are you really that far away from the cover you have (and therefore the price you pay) with the current system?

As a concept, I think this addresses the symptom, not the underlying disease. The crap that gets added into a claim (fake whiplash injuries, additional bodywork, unnecessary car hire, etc) will still be there, inflating the (base, unavoidable) premiums.


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## mullum (Sep 16, 2011)

Yeah I see your point, the "wastage" in the system definitely needs addressing.


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## Skeee (Jun 9, 2009)

Spandex said:


> And no one will ever feel that insurance is value for money because peoples minds don't work like that. They don't see the value in protection from risk, when that risk hasn't transformed into an actual event. It's the same as buying a lottery ticket and losing - no one would say a losing ticked is value for money _after_ the draw, but they all felt £1 was a small price to pay for the chance of winning £150m _before_ the draw.


 Gambling on lotteries is not compulsory by law.

If insurance premium pricing wasn't so ridiculous then I believe many would think it worthwhile. 
How can a person who hasn't claimed for longer than I've been alive pay more than double to insure a £1500 car that's immobilised Tracked and in a locked garage but less than half to insure a house and jewellery etc?


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## brian1978 (Jul 10, 2013)

Skeee said:


> How can a person who hasn't claimed for longer than I've been alive pay more than double to insure a £1500 car that's immobilised Tracked and in a locked garage but less than half to insure a house and jewellery etc?


+1 skeee, excellent analogy.


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## Spandex (Feb 20, 2009)

Skeee said:


> Spandex said:
> 
> 
> > And no one will ever feel that insurance is value for money because peoples minds don't work like that. They don't see the value in protection from risk, when that risk hasn't transformed into an actual event. It's the same as buying a lottery ticket and losing - no one would say a losing ticked is value for money _after_ the draw, but they all felt £1 was a small price to pay for the chance of winning £150m _before_ the draw.
> ...


It's an illustration of how people don't tend to be very good at factoring risk and probability into value judgments, that's all. I'm not trying to claim buying a lottery ticket is identical to insuring your car.

As for your home insurance example, I think you've proved my point. In reality the difference in premium is simply down to the likelyhood of having to pay out, but because that's so intangible, you haven't taken it into account when looking at the value you get from the two policies.


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## Dash (Oct 5, 2008)

I think the only thing that rubs me up the wrong way is the no-claims bonus. As in reality, I highly suspect it's actually a claims penalty.

The idea seems sound. People who are such good drivers they're never at fault are lower-risk, so get a reduction in price. But there is a minimal cost to insurance, and in reality most of us will go through several five-year stints where we don't make a claim. Which leads me to think that it's more we'll ramp up the cost of your policy if you've claimed, than the other way round.

Remember in insurance you'll have good and bad companies, and the bad ones are likely to be the cheaper.

If you get damaged by an anonymous or uninsured driver then the MIB is the insurer of last resort. You contribute towards this as part of your policy. So you don't have to claim on your own insurance for non-fault accidents. This _shouldn't_ affect your no-claims bonus etc. But again, insurance companies are out to make money so it depends on each one. In non-fault cases you can use an accident management firm, which despite the F.U.D. made by the insurance companies, actually have a minimal impact on premiums and generally prop up the insurance companies behind the scenes (you don't think that guaranteed hire car comes from your insurance company do you?).

If people were honest and were insured then this would reduce the cost of premiums for everybody as we wouldn't be having to fund MIB claims too.


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## Skeee (Jun 9, 2009)

Spandex said:


> As for your home insurance example, I think you've proved my point.


 How so?



Spandex said:


> In reality the difference in premium is simply down to the likelyhood of having to pay out, but because that's so intangible, you haven't taken it into account when looking at the value you get from the two policies.


 But I have. It's a high risk area so burglaries etc are much more likely.


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## igotone (Mar 10, 2010)

Skeee said:


> If insurance premium pricing wasn't so ridiculous then I believe many would think it worthwhile.
> How can a person who hasn't claimed for longer than I've been alive pay more than double to insure a £1500 car that's immobilised Tracked and in a locked garage but less than half to insure a house and jewellery etc?


It's not really a good comparison - your house is unlikely to plough into a bus queue or otherwise be instrumental in causing injuries to numerous 3rd parties. The cost of that could run into millions and you'd be covered by basic 3rd party insurance. You're assessing the insurer's risk as far as the car is concerned, purely in terms of theft of the vehicle which is actually peanuts compared to the potential risk involved in driving a car on public roads.


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## Spandex (Feb 20, 2009)

Skeee said:


> Spandex said:
> 
> 
> > As for your home insurance example, I think you've proved my point.
> ...


Because you've not factored in any real calculation of risk when judging the relative value of the policies.


Skeee said:


> Spandex said:
> 
> 
> > In reality the difference in premium is simply down to the likelyhood of having to pay out, but because that's so intangible, you haven't taken it into account when looking at the value you get from the two policies.
> ...


There are many factors, and as much as you think you've covered them, you simply don't have all the statistics available to you. Burglary is only one small part of a home insurance policy. Not only that, but individual policies for the same house can vary hugely depending on the insurer and the different levels of cover you can chose.

I mentioned earlier in the thread that the motor insurance industry has made an underwriting loss for the last 20 years - this means that the amount they've paid out in claims exceeds the amount they made from premiums. this is why I believe the only realistic way to reduce premiums further is to reduce payouts - and the most sensible way to do this is to focus on fraudulent, questionable and greedy areas of each claim.


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## Skeee (Jun 9, 2009)

Spandex said:


> .......I mentioned earlier in the thread that the motor insurance industry has made an underwriting loss for the last 20 years - this means that the amount they've paid out in claims exceeds the amount they made from premiums. .....


 I find this very difficult to believe when there has been so many new insurance companies springing up over the last two decades. Almost as if every new company was trying to jump on the insurance scam gravy train? :roll:


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## Spandex (Feb 20, 2009)

Skeee said:


> Spandex said:
> 
> 
> > .......I mentioned earlier in the thread that the motor insurance industry has made an underwriting loss for the last 20 years - this means that the amount they've paid out in claims exceeds the amount they made from premiums. .....
> ...


Well, I'm not saying they're making an *overall* loss. Maybe they make enough in interest on the premium payments to cover the underwriting loss and make a net profit. The point is though, that premiums aren't artificially inflated by the insurance companies, they're artificially inflated by every person who takes advantage of the system when making a claim.

This is why the notion of increasing your claim to 'get back at' the greedy insurance company is so ridiculous. The people doing that are the cause of all our high premiums, so they're essentially getting back at themselves and dragging the rest of us down with them.


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## John-H (Jul 13, 2005)

Would a good analogy of human behavior in these respects be Easter Island, or am I going too far? :wink: It used to be that you could deposit £20k as a bond for third party motoring liability in order to be legally insured but that was such a long time ago I've only read about it.


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