Can I ask a stupid question about car insurance?

Brid Hegarty

Couldn't insurance companies allow for a dsposits to be made by clients? As in if I buy a car older than 20 years, and they basically say "we'll have to increase the cost by 200% because we see you as being more likely to stage an accident with that car". But why can't I then say "okay I'll pay the very high price but you must give me back the extra amount if I happen to not have a crash by the end of the year".

I'm not saying it's realistic but it would be fair. It's exactly the same way it would work with a landlord. If the landlord sees you as being of high risk they'll ask for a large deposit. And it's pretty much all the one in the end assuming you trust them to give it back, and that you trust yourself not to burn the place down.

Jim_Hodge

You could say that about any insurance policy premium, less the administration costs. All customers pay towards claims made by all others in the scheme.

blackbox

They kind of do that with the no claims bonus.

Bogwoppit

May not be as stupid as you think.

Similar scenario can happen in other insurance sectors which can allow for a return of premium based on the loss ratio (claims/premium).

These would be high value policies though, the low values and margins in car insurance mean it’s just not worth the effort for the insurance company.

If you’re getting such a high quote it’s because they just don’t want that type of business, commonly called an FO quote.

Brid Hegarty

https://www.boards.ie/discussion/comment/121082286#Comment_121082286

The no claims bonus is for one's driving record. They're not saying that I'm a more risky driver on the older car. They're saying (which is probably an excuse anyway) that I'm more likely to stage an accident.

Brid Hegarty

https://www.boards.ie/discussion/comment/121082287#Comment_121082287

Well if the question isn't as stupid as I think, then how come there isn't a hope of me being able to make such a proposition? Do you think the government force insurers to not insure older cars as it's not good for car dealerships.

How do you know that the margins (as I would call profits) are low in car insurance?

It doesn't make sense that they wouldn't want that kind of business. Why would anyone turn down business? Especially when there's no actual work involved... they just click a few buttons and send an email, and post out the disc. If I were an owner of an insurance company I'd leap at the opportunity... I'd know that someone intends on buying a car if he can get a reasonably quote, and that no one else will give him a reasonable quote. So therefore I'll just give him the same quote as he'd get with a typical car except I'll ad on the deposit to account for the fact that he could be planning to stage an accident.

Allinall

https://www.boards.ie/discussion/comment/121082370#Comment_121082370

A deposit of, say €1,500 is no good to an insurance company if they have to pay out €30k on a claim.

Brid Hegarty

https://www.boards.ie/discussion/comment/121082282#Comment_121082282

But wouldn't I be paying way more than my fair share in this case.

Brid Hegarty

https://www.boards.ie/discussion/comment/121082379#Comment_121082379

But what's the difference to them if I could insure it the other way, with things the way they are as is? They'd have the money either way.

Allinall

https://www.boards.ie/discussion/comment/121082416#Comment_121082416

They keep the money as it stands. That’s the difference.

It then goes against claims from other old car drivers.

Jim_Hodge

https://www.boards.ie/discussion/comment/121082385#Comment_121082385

So where does the money come from to pay claims from others with 20 year old cars? That's the cohort your insurance risk puts you in.

A high excess is what you're looking for OP

Brid Hegarty

https://www.boards.ie/discussion/comment/121082423#Comment_121082423

But why wouldn't they be willing to take a deposit of 30K? I'd have that lying around.

Allinall

https://www.boards.ie/discussion/comment/121085586#Comment_121085586

You've a lot to learn about how insurance works.

Jim_Hodge

https://www.boards.ie/discussion/comment/121085586#Comment_121085586

That's not how insurance or risk assessment works. If you've €30,000 just lying around then buy a car with a lower insurance premium.

MikeCairo78

https://www.boards.ie/discussion/comment/121082370#Comment_121082370

I work in insurance and can categorically state that claims involving older car a far in excess of claims involving younger cars There are lots of reasons for this, from the risk profile of those that use own older cars to the cars themselves failing for whatever reason and causing crash. My 03 Fiesta costs more to insure than my 15 cmax for this very reason - I have to lump it because the figures dont lie. There is a big lie about Insurers creaming profits from motor insurance(other areas, perhaps, household) but everything from broker commissions to burning ratio(premium in versus claims out) are paper thin. You have insurers thinking they can make some money coming in, cutting premium and then failing - there has been three suchg failures in the last 10 year alone.

Brid Hegarty

https://www.boards.ie/discussion/comment/121085905#Comment_121085905

I like older cars

GSBellew

https://www.boards.ie/discussion/comment/121082659#Comment_121082659

This is your answer right here.

I recall there was one insurance company that had huge excess levels on their policys that catered for high risk drivers, not sure if they are still around.

What you are suggesting would be more tantamount to underwriting your own policy via the deposit, which would need to be quite large for it to work and there is no incentive for an insurance company to do so as they would make less on your policy than they do at present & still loose if you crash & they keep the deposit as the claim may exceed the deposit.

Brid Hegarty

https://www.boards.ie/discussion/comment/121085996#Comment_121085996

If a car is over 15 years old, then the value as a write off is a huge amount less than if it were new, so there wouldn't there be less to pay out? And I'd have imagined most collisions were due to human error and not something like the car's steering cutting out in the middle of driving because it's so old? Cars that old cars would still have the vast majority of safety features as a new car. I'm assuming it works fine in Australia. Do you think that they have more accidents with the old cars they have on the road out there?

Every so often we hear some fringe politician (usually slightly mad) take a very strong stand against the insurance cartel (if I can call it that), but nothing amounts of it. Then a couple of years later you'll hear the exact same topic be brought up (something like Pat Kenny or Claire Byrne) and get discussed in the exact same way, acting as if it's never been discussed before.

Pearse Doherty said any insurance company gets several thousand personal injury claims per year, yet only a handful of these get reported to the gaurds. Insurance companies claim that 1 in 5 claims are exaggerated, yet they were only reporting 1% of cases to the guards.

I've been told insurance companies spend a lot of money promoting the claim that €50 of every policy holder's cost is due to false claims. Do you think this is true?

Jim_Hodge

https://www.boards.ie/discussion/comment/121086419#Comment_121086419

https://www.boards.ie/discussion/comment/121086472#Comment_121086472

If you like and want older cars then you have to carry the cost of insuring them. Owners of safer newer cars can't bear the cost for that demographic.

Car repairs are of minimal interest. Personal injury and death is where the real costs are.

Brid Hegarty

https://www.boards.ie/discussion/comment/121086469#Comment_121086469

I suppose the only way the insurance company could lose there is if the insured person staged an accident in such a way that they knew it would cause enough damage that it would be more than the value of the excess amount... and that would be hard to do.

GSBellew

https://www.boards.ie/discussion/comment/121086507#Comment_121086507

There are two ways for them to loose, First if there is no claim they refund the deposit and retain less money than they would otherwise.

Second, in the case of an accident with a claim and it doesn't need to be a staged accident, say you run into the back of €30k car and write it off, they loose, say its a € 10k car with two adults in it who are injured and the car is written off, say its a € 120k car, say you knock someone down and they die. Any accident could easily end up costing more than the €30k figure.

Just enjoy your older car, even if the insurance is slightly more its still going to be less than a new car with finance and depreciation on an annual basis.

Bogwoppit

https://www.boards.ie/discussion/comment/121086472#Comment_121086472

Older cars result in larger claims than new cars due to a number of factors, that’s not up for dispute.

The reason those politicians go quiet is because there is no conspiracy/cartel/collusion, it’s an easy sound bite. Can you imagine the uproar if they heard about your idea?

The reality is that due to the potential value of the likely claim being closer to 100k than 30, the premium you would have to deposit would be an eye watering amount (although maybe not for you).

The return of said premium after the policy year just means there’s very little money left in it for the insurance company. It would only work if they did it for everyone in the cohort.

The regulator would be pretty interested if an insurer did propose the idea, I doubt it would sit very well with the “treating customers fairly” policy.

A large excess would provide a similar function to what you propose.

Eggs For Dinner

A large excess only really works for own damage claims, where the claim settlement leaves the policyholder short by the excess amount. An innocent 3rd party cannot be prejudiced by policy conditions and has to be reimbursed in full. This leaves the insurer having to allocate resources to collect the excess from the policyholder, which is time consuming and probably fruitless

Del2005

https://www.boards.ie/discussion/comment/121086507#Comment_121086507

2 cars full of people involved in a staged crash can easily get into 6 or 7 figures for compensation and costs.

A few years ago I was looking for insurance for my 70+ year old Mother in a 2003 Punto which she's had for years, she's full NCD and no points. The TPO quote was nearly €2k, the quote for fully comp was ~€400. Getting quotes recently her TPO quotes have been higher the fully comp. People buying old cars and insuring TPO to stage crashes have ruined older cars for everyone else, don't blame the insurance companies.