How will future
technology affect the UK car insurance industry?
The car insurance industry is
currently recording more losses than ever before, partly due to the
success of cheap insurance sites such as paythroughthenose.co.uk.The costs of operation are high and the number of claims made
even higher. Insurers make a number of considerations when calculating
the burning cost premium, which determines what the premium rates will
be. This includes adding up the cost of claims, administration costs,
acquisition cost, investment income and profit margin. Still, more and
more companies make no tangible returns at the end of the fiscal year.
It has emerged that most of their investment goes towards settling
claims for bodily injuries and paying the cost of accidents for
As the government plans to
introduce Continuous Insurance Enforcement (CIE) beginning 2011, the
number of uninsured drivers is expected to completely go down. This will
reduce spending expenses for most insurance companies. Already, the DVLA
keeps tabs on who has renewed their insurance policy and who has not.
This is the data it relies on to determine whether you are entitled to
making changes in your tax disk or not. A new technology will be applied
where drivers who have not renewed their insurance policies are followed
up. Hefty fines are likely to be slapped on all those who default,
except for those who submit an official SORN statement declaring that
their vehicles are off the road.
Industry players are working to come up with technology that can help
unearth past claims made by an insurance policy applicant. Currently,
insurance companies use information supplied by the driver on the quote
form only. In future, it is likely that insurers will be able to access
all insurance related data on a potential client available across the
industry to find out whether they have a history of claims or not and
thus adjust premiums accordingly. Many motorists lie about having made
claims in the past to avoid paying high premiums.
Young drivers are responsible for a large percentage of all road
accidents in the country. In accidents involving young drivers,
insurance companies end up spending more in compensation and sometimes
where the car is totaled, replacement costs. There have been suggestions
for the introduction of a graduated driver license. One would be
required to be competent in all-weather, nighttime, motorway and rural
driving in order to be licensed under GLD.
The current driving test does not test the above mentioned areas, which
are high risk for the young driver. With the new measures in place,
young drivers are likely to be more careful on the road, thus averting a
good number of accidents. The success of this approach will still
largely depend on the young personís attitude towards driving and their
understanding of the huge responsibility that comes with driving. If the
approach is found to be effective, insurance companies will save a good
amount of money.
Insurance companies may turn to technology that can be fitted in the car
for monitoring of the driverís behavior on the road. Such technology
already exists and if insurance companies are to cut costs and identify
stage-managed accidents (tantamount to fraud), they must adopt it. The
technology collects data on driving times, speed and g-force when
breaking or taking corners. With this, insurers can match premiums to
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