Car insurance is a necessary evil – no motorist wants to pay for it but each one has to have it, at minimum to abide by the law but, more importantly, to cover themselves in the event of an accident.
The concept sounds fair and sensible; each motorist agrees to pay a premium and the insurance company agrees to pay your losses, as defined in your policy. However, motorists are constantly aware that this is not the case, or at least the playing field is not as level as this. Far too often, people pick up the phone seeking insurance only to be told that their premium is going to be extortionately high or in the worst-case scenario, they are told they’re not insurable. So, what category are these people in and why exactly is this happening?
Across the board
Before focusing on specific categories of motorist, it must be noted that premiums across the board have climbed significantly in the last three years. This is because insurers were losing money for various reasons including fraud, exaggerated claims, absurdly high legal costs and a culture of making ‘‘compo’’ claims. Ireland also has very generous awards for personal injuries compared with other countries.
Insurance companies were also at fault because some foolishly got involved in an unsustainable price war for a number of years and then they had to push up prices to strengthen their reserves.
As a result, price changes affected the whole market, but there are still certain categories of motorists that are finding it particularly difficult to find affordable insurance.
Younger drivers
Insurers generally class younger drivers as motorists under the age of 24. It is worth noting that there is no longer any distinction between male and female drivers – this was made illegal under EU law in December 2012.
Prior to this, premiums for younger males were significantly higher than females.
There are two reasons why premiums for younger drivers are higher. Firstly, younger drivers tend to be more likely to crash than experienced drivers – research shows that one in five newly qualified drivers have crashed within the first six months of passing their test while other evidence suggests that a driver is considered to be inexperienced until he or she has driven 100,000km.
Secondly, while the price hike over the last number of years affected everybody, it had more of an effect on younger drivers as their premiums were higher in the first place.
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Older drivers
Although there isn’t a specific definition, motorists over 70 years of age tend to be classified as older drivers. People in that age category can only get a three-year driving licence and must be medically assessed for each renewal.
Why are premiums more expensive and harder to get for older drivers? The answer is exactly the same as for younger drivers. It is not that older drivers are getting more expensive in isolation, the whole market has gone up in price which tends to have a proportionally higher effect on those who are higher than normal risk.
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Older vehicles
The definition for an older vehicle is something that will vary from one insurer to the next, but broadly speaking it is 13 to 14 years old or older.
Again, the reason for increasing premiums is more to do with the overall market being stressed. As well as this, insurance companies are all about risk profiling whereby they will look at a host of details about a driver to make assumptions about risk. In an insurer’s eyes, older cars are one factor that present a higher risk compared with newer vehicles. Newer vehicles are mechanically safer and have more advanced safety features that improve safety for passengers and third parties, which will in turn reduce the severity and potential for large third-party claims.
In addition, older cars are cheaper to buy and are sometimes purchased with the direct intent for use in staged, fraudulent accidents.
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Penalty points and no claims bonuses
Penalty points and the loss of your no claims bonus will undoubtedly have a negative effect on your premium. If a driver has penalty points or has lost their no claims bonus, it is fair for an insurer to assume that he or she is at a higher risk of making a claim.
It is estimated that one penalty point incident could add about 12% to 15% to your insurance cost, but that can vary greatly because insurers look at multiple factors.
It is also estimated that the loss of your no claims bonus could increase your premium by as much as 50% to 80% and you will then have to claw this increase back in smaller percentages over a three- to five-year period.
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