Car insurance increased for no reason? 7 reasons why your premium might have increased
It’s hard not to be frustrated when your insurance premium goes up, especially when you have been a good driver who has avoided any issues on the road. If your car insurance has gone up but you can’t think why, here are 7 reasons why your premium may have increased.
Like any other business, insurance companies are prone to suddenly changing their prices. But this is bound to mean an increase on nearly every occasion, rather than a price cut. In most cases, this is to improve company profit, which can be a result of needing to meet the expectations of the board or stockholders.
The price can also rise due to increased costs involved in doing business, or if the policy has more risk attached to it because of the current financial climate. It may also increase in line with inflation, or because the company as a whole is not achieving the expected return on its investments. The insurance company won’t announce the price hike in such plain terms, of course, but there is every chance one of these reasons can explain the price jump.
A good way to avoid paying more for your insurance is to take out our Total Care insurance package. Not only does this ensure you are fully covered for the duration of your lease, but everything is fixed in one payment, so you will not be hit with any expected price rises.
Change in occupation
A simple promotion within the same company could see your insurance premium dramatically increase at the same time. Even though nothing has changed except your job title, duties and salary, insurance companies could assess your new position as a different type of risk. However, you should still be honest about your occupation when filling in a quote form as you are legally obliged to do so.
Credit status changes
Your credit rating can have a direct impact on how much your insurance will cost. If you to choose to pay your insurance monthly, a bad credit rating could increase the interest rate.
The tricky part is that while many insurers rely on your credit score, they each use their own systems to reach their final answer. So one financial issue could see your premium increase under one insurer, but it may not have the same effect elsewhere. Having the best credit score can help avoid this problem altogether.
Change in compensation pay-outs
Over the past ten years, compensation claims for whiplash injuries have jumped by almost 50%. This has produced a knock-on effect for insurance companies who had to find an extra £1bn a year to cover costs. And yet, during the same period, the number of road accidents on UK roads has actually fallen. This has led to the government setting up the Insurance Fraud Taskforce to prevent fake claims from affecting the average premiums paid out by other motorists.
The measures implemented include placing a cap on the amount drivers can receive in compensation, as well as taking away the right to submit a personal injury claim for a whiplash injury. It is estimated this could save up to £40 in insurance costs for each driver, although the government are yet to establish how this will be passed on.
Increasing repair costs
Auto repair costs continue to rise every year. To prevent the insurance company having their profits eaten into, these increasing overheads are often passed onto the customer. The reason the cost of repairing vehicles has continued to increase over the past decade is sometimes due to their increasing complexity.
For example, a broken bumper used to be a simple repair job. Now, bumpers can have parking sensors along with a large section of colour-matched plastic, so need more time to fix.
Consider other modern car features which have been upgraded over the years, like electronic wing mirrors. They take more time and skill to repair than with older vehicles.
These may seem like small changes, but when applied to the thousands of cars the insurance company is providing cover for, the costs soon start to mount up.
Around 1.35 million people die every year due to car accidents. Car accidents are also the leading cause of death amongst people aged between 5 and 29-years-old. The more accidents that occur, the more insurance companies have to potentially pay out, which often leads to an increase in premium costs for other drivers.
The implementation of new safety tools and technology, along with the many gadgets that come with modern cars, could be the reason why distracted driving accidents are occurring more often. Along with smartphones and other types of technology used in the car, there are more distractions than ever to divert a driver’s attention away from the road, if only for a split second.
Even if you are a good driver, you may still need to pay more because of other distracted motorists causing accidents and therefore increasing insurance costs for everyone.
Insurance premium tax increases
Another recent change made by the government that affected insurance costs was the increased rate of Insurance Premium Tax. Up until 2015, this had been set at 6%, but it doubled to 12% from mid-2017.
While this raises prices for every motorist, those with already high insurance – typically younger and older drivers – now have to pay even more. This is because Insurance Premium Tax is only applied once the initial figure has been calculated. With the rate of Insurance Premium Tax doubling in the space of two years, plus the other contributing factors towards rising prices, motorists are now being hit harder than ever.
Drivers who choose not to take out our inclusive car leasing insurance option will have to find cover elsewhere, which could lead to unexpected and expensive price increases.