Motor Insurance Premiums: the reasons behind the increases

Motor Insurance premiums continuously rise but do you know the reasons behind the increases?

The construction techniques of vehicles are constantly evolving. We are building lighter, stronger vehicles with steel alloys, aluminium and carbon fibre to reduce the vehicle weight and emissions. At the same time, occupant safety is continually being improved which has seen the introduction of AEB (Autonomous Emergency Braking) and ADAS (Advance Driver Assistance Systems) being fitted.

The introduction of ADAS should bring a real benefit to all of us as it alerts drivers to potential problems with the use of cameras and sensors on the vehicle.  This should dramatically reduce the number of fatalities and is a step change in road safety.  Unfortunately, this also means even the simple replacement of a windscreen is no longer a straight forward procedure.  The process of a windscreen replacement can now involve the vehicle having to be recalibrated in a controlled environment, pushing the cost of a replacement windscreen up from a few hundred pounds to over a £1,000. A bumper claim is no longer just a bumper replacement; it has sensors, cameras and even radars increasing the repair costs by an average of 36%. So, although the number of accidents should be reduced, the repair costs of any damage have significantly increased.

As well as the change in construction we are also seeing a huge demand for alternative fuelled vehicles.  In the last year alone the demand for alternative fuelled vehicles grew by 6.3%, with plug-in hybrids soaring by 133% to over 18,000 vehicles. Public electric vehicle charging points are expected to outnumber petrol stations by 2020.

There are some real challenges the industry faces with regards to the repair of electric and hybrid vehicles, as they require specialist equipment and knowledge often requiring cars to be repaired by the manufacturer.  Some manufacturers are insisting vehicles that are involved in low impact, low speed collisions are inspected for possible battery damage where previously no claim would be made. 

In the last couple of years insurers have seen the first real increase in theft claims since 2003.  In fact in the last 12 months thefts have risen by 11%.  Thieves are now using modern electronic technology to bypass manufacturers’ security systems.  This type of crime is referred to as keyless theft or electronic compromise.  Thieves don’t need to steal the keys to take the car.    Insurers are seeing two distinct types of keyless thefts.  The first being where the keys handed over for legitimate reasons e.g. a car wash, airport parking, valet parking or at a hotel or restaurant.  Organised gangs are exploiting this, placing people into these job roles simply to get access to the vehicles.  It then takes the gangs less than 10 seconds to replicate the key allowing them to take the vehicle at their leisure.  The second is called ‘Immediate Theft’. This is where thieves hack into the OBD system, override the alarm and program a new key.  The whole process can take less than 20 seconds.  Unfortunately the equipment used to steal the vehicles is not illegal to buy and is readily available on the internet; it even includes tutorials on how to use it!  Worryingly there are approximately 13,000 suppliers offering this equipment on the internet.

All of this coupled with the rise in Insurance Premium Tax to 12% in June, the change in the Ogden Rate (which is used by insurers to calculate compensation claims) doesn’t paint a rosy picture for insurance premiums for us motorists going forward. However, insurers are currently trialling a new device called an OBD Protector (On Board Defence). This is a hardware solution which permanently integrates into the vehicle without the need to cut into the wiring, therefore doesn’t affect the vehicle’s warranty.  It works by stopping information travelling to the OBD port and prevents the thief from accessing the information.

This is a really exciting development in vehicle security and the device costs approx. £300 with no ongoing fee.  If trials are successful, it may be an alternative to having a tracker fitted and reduce keyless thefts dramatically.

By Clare CarbyPrivate Client Manager

 

 

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