Bonus for drivers

INSURANCE - TOM WILMOT

Tom Wilmot is Secretary-General of the British Insurance Association.

Despite the congested state of Britain's roads and the rising cost of repairs, and despite the fact that an impression exists that the price of motor insurance is rising, for many motor- ists insurance has been one of the few costs which have gone down over the last few years.

At any one time nearly half the motorists in the country enjoy maximum no claims dis- count, and it is this category of motorists which is now paying in many cases almost 25 per cent less for insurance than four years ago. Of course, at the other end of the scale, the motorist whose business is less desirable has been paying a good deal more. Ilasic rates have increased and, partly in response to public de- mand for rating the driver rather than the car, the penalties imposed on careless and unproven drivers have become more severe.

The average premium paid by drivers has remained fairly static, but there has been a rise in total premium income over the motor insur- ance market brought about by the increase in the number of cars on the road and the tendency ftir people to change their cars more often and drive higher performance models. At the moment insurers are continually seeking out the good risks, and these skilful, and sometimes lucky, people may continue to expect low premiums—for the time being at any rate. In- surers must however take care that they do not reach the stage of quoting premiums which are too low even for the good driver.

British motor insurance is almost the cheapest in the world and through its efforts on be- half of the motor insurers collectively the BIA is striving to keep it that way.

Insurers spend over £100 million a year with the garage trade on motor insurance repairs. It is, therefore, a bad omen for motor insurers that over the past four years the cost of garage labour has risen by two thirds in large garages and by one third in others. Now selective em- ployment tax has dealt motor insurance a triple blow. First, insurance companies have to pay it on their own staff. Secondly, the garages have to pay it on their repair staff, and, thirdly, the garages have to pay it on their forecourt staff and, petrol prices being less flexible, tend to recoup this too on accident repairs.

Insurance companies have always kept a close check on repair estimates, but these checks are becoming ever more stringent. All estimates are checked by experienced claims-handling officials and a sample of cars are visited. Vir- tually all claims over £50 are inspected.

The British Insurance Association, for its part, is intensifying its efforts to help member companies control costs. This month events have confirmed the success of the BIA's pilot scheme, which started. a year ago in Oxford, providing a pool car damage, inspection service for members. The scheme can provide a com- plete service for member companies whose volume of business in the area would not justify maintaining their own engineers, and a supple- mentary service for other companies. The number of companies using this scheme has grown from eighteen to thirty-two.

As a result of this success, the BIA opened on 5 September a second unit based on Norwich to service East Anglia and the Fenlands, with assistant engineers based at Colchester and Newmarket. The Oxford unit is now carrying out about 100 vehicle inspections a week and the Norwich unit will expand towards this figure. The units make it more economical for companies to check on lower estimates, where previously the cost of making the visits could have outweighed the advantages.

A well as liaising with the garages, the auk is in close contact with the motor manufac- turers. The experience of nu members over the years in insuring the various makes and models of car and in spotting their vulnerable points has given insurers some pretty firm ideas about the ways in which motor manufacturers can, at the design and production stage, help to keep down the price of repairing cars.

Special crash parts for the Mini and the Jaguar have already been made to meet in- surers' suggestions and it is hoped that other manufacturers will be able to take up the BIA's suggestions. Repairability is, of course, a factor which insurers take into account when deciding what premium rates to charge. Insurance premiums can influence buyers and so improved repairability can be a good selling point.

As well as co-operating with repairers and manufacturers in keeping costs down overall, insurers are concentrating increasingly on identifying the good risk and offering him cheaper premiums while penalising anyone who represents a worse than average risk. Also, policyholders are being encouraged to share the risk with their insurers by paying the first few pounds of any damage or lass claim. This can happen either voluntarily when the policy- holder agrees to have an 'excess' for which he receives specially favourable terms or involun- tarily when the insurers require him to carry an excess as a condition of cover because of his record or inexperience. It can also happen indirectly, when the desire to preserve a no claim discount discourages small claims.

For insurers to be able to discriminate efficiently, they .require first-class statistics. A major step forward in producing better statistics was taken by the am in establishing a statistics bureau at the end of 1966, drawing on infor- mation from 25,000 motor policies. Although the number of participating companies only represents a part of the market, already by mid- 1968 the bureau has expanded to cover two million policies and next year the BIA will hire its own computer for the operation. Within two months from the end of each quarter aggregate statistics are prepared and participating com- panies supplying data receive an analysis of their own companies' figures in the same format for easy comparison.

The figures 'from the statistics bureau are helping motor insurers to indicate more pre- cisely the extent to which the experience of young drivers is worse than that of older drivers. Motorists lip to twenty show the worst experience and there is a continuing improve- ment in performance up to the age of thirty. Thereafter the pattern remains broadly un- changed. At the moment only drivers under twenty-five tend to be discriminated against by the insurers—being ineligible for special low-cost schemes or having to pay the first so many pounds of any claim—and the drivers in the twenty-five to thirty age group have been given the benefit of the doubt.

The initiatives which British motor insurers are taking now are aimed at making sure that the pace ofchange does not overtake them and that—whatever future social patterns and de- mands may bring—insurers are flexible enough to meet and satisfy them.