First it was personal injury, now motor insurers are blaming oil prices for higher premiums

Listening to the BBC’s Moneybox program today I heard yet another excuse from motor insurers for the increase in motor insurance policies. This time around, they’re blaming the price of oil. Lower oil = more driving = more claims, or so they say.

As someone who worked in the Insurance Sector for many years, including underwriting, I have to say this is the most incredulous excuse I’ve heard to date. Oil prices have only very recently been reflected in the price of fuel at the pumps so I find it extremely difficult to accept this excuse. Of course there will be a slight increase but I simply don’t believe that the lower price of oil is resulting in so much additional driving that premiums need to rise as they have to compensate for the additional claims which underwriters are experiencing.

Previously, motor insurers had blamed in the increase in personal injury claims for the high cost of premiums. I can agree with this as I’ve seen countless cases of personal injury. The sector is swamped and some claims are dubius at best but insurers unlikely to challenging many due to costs, time restrictions and the risk of losing the claim.

The real reason motor insurance premiums are so high

What you’ll never hear a boss of an insurers tell you is that they are losing a considerable amount of money because they’re claims departments are understaffed or staffed with inexperienced people. Ask anyone who deals with motor claims departments on a daily basis and they’ll tell you the same. The main issues you’re likely to experience in the motor claims process include:

  • extremely long home times on the telephone, with some insurers completely refusing to take calls from third party insurers (thus increasing the time it takes to settle a claim)
  • letters taking up to two months to be responded to
  • inexperienced staff when you do get to speak to someone
  • lost file (some insurers still use paper files and even in 2016 they still go missing)

Credit Hire

Credit Hire claims are a huge expense to the industry and whilst some insurers are getting much more firm on what they will (and most importantly won’t) pay, the slow manner in which claims are dealt with means that some people are staying in Credit Hire vehicle for many months – especially where their is a dispute over liability and the Credit Hire claimant holds third party only cover. I’ve seen cases where people have been in a credit hire vehicle for 180 days. At £40 a day this is a considerable chunk for an insurer to pay.

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