# Insurance News



## ITSt (Apr 28, 2006)

Hi Folks,

Just read this bit of news on Insurance costs, please excuse the long cut and paste :

_The cost of your car cover could be about to change as the grouping system used by insurance companies alters for the first time in 15 years. Until now, each car has been given a 'group insurance rating', rising from one to 20. Cars are rated (Advertisement) according to a number of factors including vehicle make, model and series, cubic engine capacity, cost to repair and performance in crash tests. The higher the group, the more relatively expensive it is likely to be to insure the vehicle.

Last month, the range of insurance groups was expanded from 50 groups. The Association of British Insurers says: ''The formula used since 1992 as the basis of the system has not kept pace with changes in vehicle technology and the ever-increasing range of vehicle types. The relative 'weightings' no longer accurately reflect relative risk levels.'

For example, insurers have traditionally looked at maximum speed and acceleration rates but the new system will be able to take modern developments into account. 

In the last three years the range of new cars has risen 42% to 6,000 models. Insurers will continue to take into account other factors such as a driver's age, driving history, where the car is located and how the vehicle is used but in future, insurance will also be based on the likelihood of a car being damaged in a crash or damaging another car and the likely cost of repair. 

*Weighty issue*

Crucially, the weight of vehicles will be taken into account for the first time. It stands to reason that the heavier the vehicle, the greater the potential for the driver to be liable for injury or damage to third parties in a collision. This could mean insurance price hikes for 4x4s or so-called Chelsea tractors and will come as a blow to those who genuinely need 4x4s because of their work or location.

'Certain 4x4s, although sustaining little damage themselves in a collision, can inflict considerable injury/damage to others. Vehicle manufacturers are becoming ever more sophisticated in the way they segment the market, creating more and more niches,' says an ABI spokesman.

The changes are likely to hit drivers of 'super-mini, multipurpose vehicle (MPV), compact-executive and lifestyle 4x4s' as well as those who drive sporty diesels and even some mid-range hatchbacks. This could add hundreds of pounds to the typical comprehensive quote. But the Association of British Insurers said that, overall, the rises and cuts would balance out and insists that drivers of less risky vehicles will see their premiums fall.

*Going up?*

Car insurance has already risen by more than 4% in the last three months of last year and the AA predicts it was already on course to go up a further 18% this year. Premiums are rising because, despite the number of accidents falling, the cost of repairs and medical bills is rising. Passengers are more likely to survive, but face crippling injuries and make hefty personal injury claims. Uninsured drivers and fraud also add to insurance bills.

Royal Bank of Scotland had been increasing premiums by 5% over the last few months of 2006 and will add a further 1% to premiums per month for the first six months of 2007. The move by RBS follows the controversial decision by Norwich Union in the autumn to increase premiums by as much as 40%. The move by these two companies alone could impact on four out 10 motorists. 

Some experts say rates need to rise by as much as 10% for the insurers to make money. 'It has been well publicised in the market that the present position is unsustainable. Premium inflation has been outstripped by claims inflation for the past four years,'' says an RBS spokesperson. 

There are concerns that millions of motor insurance customers will not understand the direct impact of the move by RBS unless they are familiar with their policy small print. Direct Line, Privilege, Churchill, Lloyds TSB, Prudential, Tesco, Egg, Virgin Money and Nationwide are just some of the big brands backed by RBS, and motorists must not make the mistake of jumping from one RBS-backed brand to another.

The message to motorists is to shop around. Internet quotes are generally cheaper than telephone quotes, with some companies giving discounts of between 5 and 10% for customers who buy online.

'It's important to remember that if your circumstances have not changed, you should be able to renew your policy for the same price, if not cheaper. My advice to motorists is to consider newer, smaller insurers such as esure.com and swiftcover.com,' says Richard Mason of moneysupermarket.com. _


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