I stumbled upon an article reporting a downward trend in car insurance premiums in England and would like to share some views on the trends reported.
BACKGROUND
Before I delve deeper, a simple explanation on how motor insurance premium works for a Tariff / non-tariffed scenario.
Malaysia's car premium are calculated on a tariff basis. In other words the amount of comprehensive premium is calculated based on the type of vehicle being driven. Additional charges/clauses (Excess & loadings) are added after the basic premium is derived from the tariff.
The tariff acts as rule and is monitored and controlled by Malaysia's insurer's association (PIAM)
In a non-tariff scenario like the UK, premiums are calculated based on multiple factors such as the driver's profile, supply & demand and competitive pricing in the market.
BBC News reports that young drivers are experiencing falls in premiums in the first part of this year. "coming down by a fifth; while the smallest movement was for those aged over 70 whose premium went down 7%."
Source:-www.bbc.com
In other words insurers are starting to charge youngsters a lower premium while maintaining or providing a slight decrease to other age demographics.
FAST CARS & OLD DRIVERS
A possible reason charging young drivers higher premiums are due to particular lifestyle of this demographic that are frequently speeding behind the wheels and have a higher tendency to drive at night (probably intoxicated).
FRAUD & PREMIUM
BBC news mentioned that "Legal reforms introduced by the justice ministry to curb organised attempts at whiplash injury fraud coupled with better fraud detection by insurers have also certainly helped put downward pressure on premiums."
Source:-www.bbc.com
VIEWS
What caught my attention was the reference to fraudulent claims which does not typically concentrate on a particular demographics or vehicles types unless supported by actual statistics on number of frauds detected against particular segments.
Is there a possibility that cheaper premiums could also be due to less youngsters affording a vehicle or seeking alternative modes of travel?
What about a trend in youngsters purchasing new cars which are less accident prone?
