Why have insurance rates gone up so much recently? Before I get into the meat of this, let me first say that I am a solicitor, not an insurer. But I do have an unusual perspective on the insurance industry, and 30 years of dealing with insurers has given me a jaundiced and cynical eye. So, why has insurance gone up so rapidly? In researching this column, I also looked at insurance rates in Ireland (where I am a non-practicing solicitor) and France. In those two countries, motor insurance generally has gone up roughly in alignment with inflation, whereas British insurance has gone up by about 58% in the last year according to the insurance comparison website, Confused.com. Other sources give a range of 35% to 60%. So, why is British insurance rising so much more quickly than French and Irish insurance?
After all, cars and motorcycles in Ireland and France are as advanced as UK cars. It is true that a modest bumper to bumper hit, which 10 years ago would have been fixed with some valance repairs and paint, now has a big rewire of traffic radar and sensors. Halogen lights and reflective mounts are now LEDs and so on, but if this were a major factor, then French insurance would be rising like UK insurance.
The second element is supply chain. Parts are more expensive to supply, especially when shipments have to go via the Suez Canal, but this impacts the French and the Irish as much as the British. So, we can rule this out as being a differentiating factor.
The UK alone left the EU, so could the effects of Brexit a factor? The devaluation shock which followed the Brexit referendum dropped the value of the pound by approximately 20%-25%. Naturally this would have pushed up the value of imported parts for repairs, but that shock was eight years ago, so its relevance is long past.
Is it the British claims culture? Well, the French and the Irish bring claims, and the UK has had a government that sought to drive down claims, and accident injury claims have actually gone down consistently, reducing by 46% since 2019.
So, can we point to a single factor which makes the British market so expensive when compared to our nearest neighbours? Yes, I can. It is the rise of the industry of ‘accident management.’ Let me explain. These days, if you crash your bike and report it to your insurers, you’ll be bombarded with calls from accident management companies promising you a ‘free’ service. This could include bike recovery, a courtesy vehicle, repairs, personal injury assistance, and more. For example, every day your bike is off the road, it is costing an easy £175 a day in hire and storage. When you sign up for this service you are making yourself personally liable for all these costs.
At the same time, since regulation changes in 2021, UK insurers have been brutally competing with each other to be the cheapest premium on comparison websites. So, if they could make a handy side hustle of not meeting fully comp claims, but rather packaging up an overpriced claim for a competitor to meet, they still got to be the cheapest premium.
But of course as the saying goes, you sow, so shall you reap. This model has come home to roost, and with almost every UK insurer adopting this behaviour, you the consumer are paying for it with a hike in your annual insurance renewal.
Andrew Dalton
Adventure Bike Rider – April 2024
