Why is car insurance getting ever more expensive?
There are a number of reasons why insurers say they need to raise premiums. Firstly, more people are taking insurance companies to court and payouts are getting higher. Many other costs are rising as well. Cars may be getting cheaper, but more sophisticiated design means that they can be more expensive to repair. Insurers pay 3bn a year for components and spend another 3bn on car repairs. Fraud is also an issue. Direct Line estimates that one in 20 drivers is uninsured and this is reflected in high premiums. Overall, car insurers are finding it more difficult to make a profit. Last year, the motor insurance industry lost 1.3bn as a whole. Direct Line calculates that for every 100 motor insurers picked up in premiums, they paid out 120. Insurers’ profits are premiums (plus the money made by investing the premiums) minus the cost of expenses and claims, so even for profits to remain the same, premiums have to rise. Is the UK market competitive? There is fierce competition for customers,
