Insurance premiums set to soar after compensation changes

bob6600

MB Enthusiast
SUPPORTER
Joined
Jan 3, 2013
Messages
7,269
Car
AUDI S8 V10, S210 E320 CDI (R.I.P.)
If £75 is a guide, that means over £100 in real terms.

I understand accidents happen but being a clean, safe, claim free diver has no benefits
 

trapperjohn

MB Enthusiast
Joined
Nov 19, 2008
Messages
7,305
Location
Lancashire
Car
124 300D 24V Estate
Perhaps HMG will drop the insurance tax to compensate its poor earning tax payers and voters then.
 

Dryce

MB Enthusiast
Joined
May 17, 2006
Messages
9,254
Car
..
Sometime published numbers don't add up.

So. According to 2015 figures.

The ABI says the average motor insurance policy costs £367

Injury claims make up 51% of the total payout from motor insurance claims.

Lets assume that the £367 excludes IPT.

So that means logically not more than 51% of the average premium is allocated to injury claims. That's being generous to them as presumably there are other costs in the premium other than just claims. Anyway using 51% of the whole premium that's £187.17.

Now these changes to the insurance payouts are stated as being changed by discount that was 2.5% that will become -0.75%.

So that means that £187.17 covered 97.5% of the claim so should really have cost - £191.97 if the original discount of 2.5% wasn't applied.

Now there's a negative discount of 0.75% so that increases that £191.97 to £193.41.

So that would imply that the injury claims portion of the average premium would go up by £193.41 minus £187.17 which is £6.24.

Now let's be fair - if they are excluding IPT from the £367 but including it in the numbers that are being bandied about in the press today then IPT at 10% then that should be added. So that £6.24 increase becomes £6.87 if rounded up.

£6.87 is a whole lot less than £75.

If their other numbers of £1000 for young drivers and £300 for 'older' drivers are treated proportionately to the £75 claimed then this would imply actual increases for these categories should be £91.60 and £27.48 respectively. These are ...... a whole lot less than £1000 and £300.
 
Last edited:

MikeInWimbledon

MB Enthusiast
Joined
Nov 8, 2014
Messages
3,669
Car
Previously C216, CL500 S212 E500, W211 E500 5.5, E350, W221, S211 E500, SL350, SL500, S500, E55
Good calculations....

Sometime published numbers don't add up.

So. According to 2015 figures.
The ABI says the average motor insurance policy costs £367
Injury claims make up 51% of the total payout from motor insurance claims.
Lets assume that the £367 excludes IPT.
So that means logically not more than 51% of the average premium is allocated to injury claims. That's being generous to them as presumably there are other costs in the premium other than just claims. Anyway using 51% of the whole premium that's £187.17.
Now these changes to the insurance payouts are stated as being changed by discount that was 2.5% that will become -0.75%.
So that means that £187.17 covered 97.5% of the claim so should really have cost - £191.97 if the original discount of 2.5% wasn't applied.
Now there's a negative discount of 0.75% so that increases that £191.97 to £193.41.
So that would imply that the injury claims portion of the average premium would go up by £193.41 minus £187.17 which is £6.24.
Now let's be fair - if they are excluding IPT from the £367 but including it in the numbers that are being bandied about in the press today then IPT at 10% then that should be added. So that £6.24 increase becomes £6.87 if rounded up.
£6.87 is a whole lot less than £75.


The only point to add is that administration must take up at least 20%, if not 25% of the annual premium / payout process.

Marketing, advertising, commissions, credit card charges, administration, IT, compliance, legal, financial, claims processing, inspection, QC, accounting, and extraordinary Operational risk costs. (Although I'm sure there's an Insurance expert here who can comment)
 

st13phil

Hardcore MB Enthusiast
SUPPORTER
Joined
Nov 6, 2007
Messages
10,112
Location
North Oxfordshire
Car
His - Denim Blue A220 AMG Line Premium / Hers - Obsidian Black R172 SLK55
Now these changes to the insurance payouts are stated as being changed by discount that was 2.5% that will become -0.75%.

So that means that £187.17 covered 97.5% of the claim so should really have cost - £191.97 if the original discount of 2.5% wasn't applied.

Now there's a negative discount of 0.75% so that increases that £191.97 to £193.41.

So that would imply that the injury claims portion of the average premium would go up by £193.41 minus £187.17 which is £6.24.
I thought the discount rate was a compound annual rate, so for a claimant with an expected time of dependency of (say) 20 years the discount would be 1.025^20, but is now 0.9925^20?
 

CabrioDave

Active Member
Joined
Dec 18, 2016
Messages
243
Location
West Midlands, UK
Car
A124 E220 Cabriolet
I thought the discount rate was a compound annual rate, so for a claimant with an expected time of dependency of (say) 20 years the discount would be 1.025^20, but is now 0.9925^20?

Correct about the compound point. Not sure, though, whether the calculation is that simple. (The injured person needs funds in each year, so does the discount apply at x^1 for the first year, x^2 for the next, and so on?)

If it is applied in that simple way, though, a £1 million payout would have been discounted to (say) £610,000 but will now be raised to £1.16 million. Certainly enough to make a chunky change in premiums!
 

Charles Morgan

MB Enthusiast
Joined
Feb 2, 2010
Messages
8,206
Car
Mercedes 250CE W114, Alfa Romeo GT Coupe 3.2 V6
The annual stream of payments is discounted at the rate for each year, so compensation = sum of PMT x 0.9925 ^ 1 + PMT x 0.9925 ^2 etc.

It's a massive difference, but as the legislation is based upon the risk free rate it's hard to argue with the discount rate, rather the notion that it should be risk free.
 

Dryce

MB Enthusiast
Joined
May 17, 2006
Messages
9,254
Car
..
If it is applied in that simple way, though, a £1 million payout would have been discounted to (say) £610,000 but will now be raised to £1.16 million. Certainly enough to make a chunky change in premiums!

If it's applied in a simple way to my numbers then it is more like a £174 increase on an average £367 premium. (93% increase over the £187.17 derived from the 51% of the gross).

So to be fair - that is way more than the headline of £75.

There is another figure being quoted as £55 per policy.

I wonder what the impact of this is on the RPI.
 

Charles Morgan

MB Enthusiast
Joined
Feb 2, 2010
Messages
8,206
Car
Mercedes 250CE W114, Alfa Romeo GT Coupe 3.2 V6
Most injury claims are one off - £2000 for whiplash type. These are for serious injury causing requirements for continuing care or loss of income (or both) etc. So the effect will vary between insurers depending on claims experience. It may also hit different customers differently - so premiums may well rise a lot more for the riskiest customers.
 

fabes

MB Enthusiast
Joined
Apr 12, 2007
Messages
1,902
Location
Southampton
Car
E 350CGI Coupe and X-Trail
And there are further changes to small claims court limits for whiplash claims from Oct 2018 which will lead to increased claims and costs as they are pulled out of the portal (the one good thing that effectively rid us of the claims for u industry), so another bizzare backwards step
 

FirstMerc0

Member
Joined
Apr 4, 2017
Messages
30
Location
Home Counties
Car
W204 C63 AMG
Most injury claims are one off - £2000 for whiplash type. These are for serious injury causing requirements for continuing care or loss of income (or both) etc. So the effect will vary between insurers depending on claims experience. It may also hit different customers differently - so premiums may well rise a lot more for the riskiest customers.

This is the whole problem with society nowadays - thanks to the ambulance chasing firms, anyone in an accident seems to think it's normal to claim for whiplash regardless of scenario, and it makes the real claims difficult to discern from the dishonest people trying to play the system and make a quick buck.
A friend who's a bus driver was driving his bus when it was hit by another vehicle - 90% of the passengers wanted the company's details to claim for "whiplash" :crazy:
 

Users who are viewing this thread

Top Bottom