Insurance warning... by Zeb

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Legalised theft.

I had a client in today who related the following tale...which he agreed to let me post up....

He is 19 years old, working full time and living at home with mum and dad. He bought himself his first car, an oldish Ford Fiesta 1.25 Zetec and went shopping for insurance....his best quote was £3918 -bearing in mind the car was worth about £500 - strangely, it was £30 cheaper to be fully comp than Third Party, Fire and Theft. He was paying this in instalments unsurprisingly!

Two months down the line he came round a corner too quick and into a pig pen (rural Lincs). This was witnessed by another motorist who promptly called the one hurt and no other vehicles involved. Police duly arrive and check his insurance but presumably their systems were down so they did this by phoning his insurance co. and telling them he had been involved in an accident. The lad would not have informed them himself owing to the value of the vehicle and losing future NCD etc.

Insurers less than promptly send a recovery vehicle from over 100 miles away to recover the car to their compound for inspection, the lad having been told 'he might as well claim on it'.

Assessor looks at car and finds he has snapped off two engine mounts and car is beyond economical repair....fair enough! Of course the insurers then tell the lad that his voluntary excess of £150 and his under 21 loading of an additional £400 means that he will get nothing for the car....HOWEVER, now of course he has made a claim so what happens next? Firstly he is informed he can transfer his insurance to a new car.....he duly buys a Fiat Punto 1.2, then they tell him that this is more expensive to insure...but not only that, it takes him beyond a £5000 'insurance cost limit' which is not permitted on one he'd have to buy another policy.... at this point he finds insurance elsewhere for much he thinks...and takes out a new policy and rings to cancel his old policy. Unfortunately he is then told he cannot cancel it because he has had a claim and therefore has to pay the entire year's premium - as per their policy schedule of course!

So, the upshot is that he has an insurance policy for which he has no car but is obliged to pay the remaining £2k premium because he made a claim, which gained him nothing whatsoever and cost the insurers the price of a towtruck recovery.

Moral of the story for new drivers: Always read the small print...and be VERY suspicious if fully comp is cheaper than tpft!

Posted 12 Sep 2012, 19:00 #1 

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Yes Unfortuneately a standard clause, if you make a claim and you are on payments you must finish that year of payments or transfer to new policy. If you had paid price on purchase you loose just the same but have paid in advance.
Many have been caught on this and not only young motorists but anyone with a premium of more than the "Insurance" value of car.
.............and people wonder why some motorists are uninsured!!

"My lovely car now sold onto a very happy new owner.
I still love this marque and I will still be around, preferred selling to breaking, as a great runner and performer"

Posted 12 Sep 2012, 20:10 #2 

and be VERY suspicious if fully comp is cheaper than tpft

Zeb, I found that 3rd Party F&P was more expensive than Fully Comp when I was messing around while looking for a renewal for this years Insurance. Bearing in mind I am 43, with 8 Years NCD, no Convictions etc.

It does state that tpf&t can be more expensive when you use certain "Quote Sites" too ;)

What happened to this chap is astonishing, near 4k for insurance? Damn I am so glad to be old(er)nowadays......

It is high time that the Gov't or someone looked into Auto Insurance. What is the point of outpricing Customers? I mean, surely the benefits of having more Insured Drivers through cheaper Premiums would be better all round? I suppose though, Profits are more important in the short term to these Hyenas.

Fitted Electric Memory Seat, Leather Cubby Lid, Wood Dash, Message Centre.

Posted 12 Sep 2012, 20:39 #3 

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Amazingly, it seems far more expensive to insure a low value vehicle. I have had some absolutely silly quotes for my ZT-T, but now looking to insure the project 75 looks even more unlikely.

Best quote I could get, based on cancelling the Z policy, therefore using all 10 years NCD for the 75, was around £400, on a £600 car.

Out of interest, I found a £19000 Insignia, entered the reg, and got quotes of £260!

Posted 17 Oct 2012, 21:57 #4 

This is not intended as a defence of insurance companies, merely an attempt to shed light!

These cases happen repeatedly and there appears to be a general misunderstanding of how premiums are calculated by Insurers and the associated risks they take into account, especially when young or inexperienced drivers are concerned.

The value of the car is largely irrelevant to Insurers when young or inexperienced drivers propose for insurance, unless the upper value in a wide value range is exceeded. So a typical value range for indemnity purposes might be £0 to £5000. As a rating criterion it is only relevant if the £5000 is exceeded. As newly licensed drivers - where most potential claims are - invariably buy as cheap a car as possible then that becomes the favoured option for the highest premiums. Ipso facto, the youngest and most inexperienced drivers are charged the most, by default.

Taking a corner too quickly and losing control justifies the Insurer’s caution. It could very easily have been a `bus queue rather than a pig pen! The police called his insurers to confirm his cover, the notification of the accident was not their responsibility. The driver is required, as a condition of his insurance, to notify the insurer of all accidents irrespective of whether a claim is intended. It follows that he does not have to make a claim and he could have declined to claim on his insurance, scrapped the damaged car, replaced it with another of the same insurance rating and notified his Insurers of the change.
Having more drivers insured with cheaper premiums would result in proportionately more claims at those lower premiums! Not a good plan if you are an insurance company.

I can readily understand calling insurers names but it’s not constructive to blame them for making profits - no more than Tesco or PFI’s in the NHS, Virgin trains or Sky TV.

It is an awful position for the driver here, he is considerably out of pocket. He will also carry the penalty with him for some time, what with the loss of NCD etc. However, whose fault was the accident? So who should pay? If any good is to come from it, might it just make him, and all who know him, take more care and assume their individual responsibility when driving on the roads that the rest of use? A recent survey showed that over 70% of drivers only took insurance because they had to by law, they were not at all interested in safeguarding their cars or the financial effects of crashing into others!

On another positive note, the government is undertaking a review into motor insurance with the objective of trying to achieve a more fair and balanced market. Don’t hold your breath, but it’s a start.

Posted 18 Oct 2012, 14:28 #5 

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How does the insurance price compare with the £1200 a year I was paying in the early nineties
I was in my 20's but a combination of no NCD for a car and living in a higher than average crime area. The car was a 1986 Ford Orion 1.6i Ghia.
I managed to lose my NCD when my previous car was stolen and written off.
Just to put it into context my mortgage at that time was £300 per month

Posted 18 Oct 2012, 23:46 #6 

MN190 wrote:How does the insurance price compare with the £1200 a year I was paying in the early nineties
I was in my 20's but a combination of no NCD for a car and living in a higher than average crime area. The car was a 1986 Ford Orion 1.6i Ghia.
I managed to lose my NCD when my previous car was stolen and written off.
Just to put it into context my mortgage at that time was £300 per month

Trying to put things into context is virtually impossible with so many factors to play with. The whole nature of insurance, other than the underlying principles, has changed, especially the marketing of it.

The advent of on-line business practice, the failures of High Street broking firms unable to compete due to inexorably rising costs of commercial premises, and a myriad of legal requirements before you can trade in absolutely anything have all had effect. Taken together with several major insurance companies being absorbed by predatory syndicates that were only after their client base, it’s not surprising that the business has become vicious.

However, the details you give prompt at least one thought. The mortgage you quote at £300 per month was a fraction of the risk to the lender compared to motor insurance. Largely because they had a First Charge on the property, usually for less than the property was worth on the trade auction market. The lender was on a dead cert if you had defaulted on the loan because even if repossessed and auctioned they would have come out on top, all they had to get back was their outstanding mortgage. And even that was, wait for it, insured by what’s called reinsurance! So the difference in costs reflect the risk.

In the nineties mortgage rates were higher than now but the rise in property values (and, as we all know, motor insurance claims) dictate the need for higher mortgages, making repayments on average 5 times as much. There’s no escape - only inheritance is free - if you know how to minimise the tax liability! It’s not difficult to do, just needs planning - and Inheritance Tax is after all entirely voluntary!

Posted 19 Oct 2012, 12:47 #7 

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No the lender wasn't on a dead cert
Bought at wrong time and sold the house 10 years later for less than we bought it for despite fully modernising it

Posted 19 Oct 2012, 20:11 #8 

Sorry, you've lost me. How does selling the house for less than was paid for it affect the lender?

Posted 20 Oct 2012, 11:15 #9