Jill Kerby

CARTEL OR NOT, YOU NEED TO GET THOSE MOTOR PREMIUMS DOWN

Good luck to the Competition and Consumer Protection Commission in trying to establish whether the motor insurers and brokers have set up a cartel to rig insurance premiums.

This is a small place. And the number of motor insurers is smaller than it used to be. And it hasn’t been unusual in the past for financial players to announce a rise, say, in their interest rates - in the case of banks – or their premiums, in the case of health insurers, around the same time.

But when it’s happened in the past it was mostly a case of them opportunistically and very publicly following the leader, sheep-like, rather than a secretly conspiring to do so. In the case of the banks, the sheep leader is often the ECB after they’ve upped their rate.  Motor, home and health insurers take every opportunity to react to the latest statistical reports on weather events, accident rates or further expensive policy measures (in the case of health insurance) taken by the government for all their premiums to rise.

And while motor premiums are up c38% on average over the past year, not every driver has seen the same percentage increase and it is that kind of evidence that the CCPC will probably need to find to prove their case.

Even if they do, price-fixing, while a criminal offense, is more likely to result in fines than jail-time, so don’t expect to see any insurance bosses or brokers doing ‘the perp walk’ anytime soon.

The insurers are correct, however, in stating that the higher premiums we’ve seen are due to the higher cost of claims. But they are disingenuous in suggesting that it’s mainly been due to the high settlements the courts award in injury cases or the big fees that the legal profession continue to rake in from these cases.

In a major survey conducted by The AA in early 2015, both of these factors feature, but are only two pieces in a much bigger picture that includes

-       a relatively high number of uninsured drivers;

-       a high level of fraud that the industry is not dealing with effectively enough, particularly in the use of software technology used in other jurisdictions.

-       not enough Even more significant, claimed the AA is that premiums were set at far too low a level and for too long after the economic collapse occurred in order for the insurers to maintain their market share and compete for new or transfer business.

And a factor that is completely underestimated is that the insurance industry is not achieving the kind of investment returns that it once enjoyed, and on which it not only meets it’s claims and reserves but also its own overheads and the dividends it pays its shareholders.

In this, they share the dilemma also facing the pensions industry – where safe bond yields and fixed interest returns are at historic lows and therefore cannot meet defined benefit pension scheme promises to workers, and anyone who has come to rely upon a bank deposit yield. The culprits in this case are central banks and their nearly decade long, retrograde low-to-zero rate interest policies that have clearly failed to “stimulate” moribund, debt-bound economies.

Unfortunately, blaming central bank policy on top of everything else doesn’t offer much consolation if your motor insurance has become affordable. For that you need to take some action of your own to try and bring that bill down.

Here are few suggestions:

-       Always challenge a higher premium. Speak to your broker and instruct them to seek a better deal. Or call your (direct) insurer and ask how you can find some savings. Remind them, if this is the case, that you have no penalty points/ that the car has an alarm/is parked inside a garage/includes your spouse as a second driver, etc.  Tell them you will move your business if they don’t reduce the premium.

-       Use a broker. Or switch to a new one. They should be able to find you a better premium if you have a clean insurance record and often will offer a minimum 10% “savings” on your renewal quote by sharing their commission with you in year one.

-       Agree to a higher “excess” payment to bring down the premium.

-       If you have an old car that is not particularly valuable, consider only carrying third party, fire/theft coverage.

-       Drive an older car – they cost less to insurer (but can cost more to tax, maintain.)

-       Drive a vintage car. Insurance can be very low on cars that are 30 years plus.

The road haulage industry wants to be able to tap into the wider EU insurance market for much cheaper cover. So should the rest of us.

It wouldn’t solve the high awards problem or the number of uninsured drivers here, but it couldn’t hurt.

Do you have a question for Jill?  Please email her directly at jill@jillkerby.ie or write c/o this newspaper.