Jaw-dropping increases in auto insurance in Britain, as News-insurance.com reports:
Over the first quarter of 2011 – a period when premiums usually show little movement – the typical Shoparound premium for a comprehensive car insurance policy rose by 5.9% to £892.08; and by 40.1% for the 12 months ending 31 March 2011.
$1.62 buys a British pound these days, so that translates out to US$1,445. The Shoparound quote is the average of the lowest three quotes in the survey.
But the number of accidents is falling. The problem: Britain has fallen into the cheating cycle in insurance. Rates are high, so claimants want to “get their money’s worth” from their insurance. So they invent or – more likely – exaggerate injuries:
Simon Douglas, director of [survey designer] AA Insurance, says: “The record rises in fuel costs coupled with spiralling car insurance premiums is disappointing news and is making driving unaffordable for many, especially cash-strapped young drivers.
“This is leading to more people withholding information when taking out a policy or exaggerating personal injury claims to try to reduce their costs. But this simply piles on costs for insurers and results in yet higher premiums for honest motorists
“Despite the sharp premium increases, insurers are still making losses although the large underwriting deficits of 2009 have probably now been halved.”
The main drivers of premium inflation remain fraud and injury claims, Simon Douglas explains. These were identified by the Commons Transport Committee as being among the chief causes of rising premiums. Kenneth Clarke MP, Lord Chancellor and Secretary of State for Justice announced on 29 March a number of measures to curb the high costs associated with the UK’s ‘no-win, no-fee’ claims culture which, according to some estimates, is piling up to £80 on every honestly-bought car insurance policy.
‘No-win, no-fee’ is the equivalent to America’s contingency fee for lawyers. In America, the whole system is so baked in, we scarcely notice.
Update: BBC reports that in Northern Ireland, young men are receiving quotes up to £27,000 for auto insurance, which translates to, er, a Lexus.