Wheels have come off UK car insurance

Prices, accidents and vandalism are all down, but deliberately bloated repair costs mean premiums keep going up

Vehicle theft and vandalism have plummeted, but insurers still whip up fears of car crime to jusitfy higher premiums. Photograph: Steve Allen/Alamy

The car insurance market is broken. As a country, we're paying around £10bn a year to insure our cars, and billions of that is wasted. According to the AA, drivers in Britain fork out an average of nearly £1,000 each to insure their cars, up from around £350 in 1994. Those figures include everyone from 17 upwards, which is why they seem so high – most middle-aged people pay closer to £500-£700. Yet it's evident that carinsurance has shot far ahead of inflation and earnings, despite the fact that (a) we're having fewer serious car accidents and fatalities almost year in, year out; (b) car crime has collapsed; and (c) car prices have fallen.

One of the fantastic things about Britain is how few people die on our roads – just 1,900 last year, with 23,000 serious injuries. In 1990, it was 5,217 dead and 60,000 more seriously injured, while in 1966, the worst year, we killed 7,985 people on the roads. In France, the figures are double ours.

Now let's look at car theft and vandalism. According to the ONS, the total recorded "offences against vehicles" soared in the 1980s, peaking in 1992 at 1.55m. Since then the fall has been astonishing, with just 417,000 offences against vehicles in 2011/12. Even as unemployment has climbed, theft and car crime has continued to fall. So while insurers whip up fear about car crime to justify costly premiums, in fact it's at the lowest level in a generation.

What about car prices? A new Ford Focus (£14,000+) costs a lot more than a Ford Cortina in 1980 (£3,475), but in real terms the price of cars has advanced little, if at all. Meanwhile the price of used cars has fallen, both in real and absolute terms. I called webuyanycar for a valuation on my only car, a 51-reg Alfa. It came in below £400 – less than I pay for the insurance on it.

How did we get to the situation where insurance can cost more than your car? The reality is that the part of the premium that goes to cover accidents and theft keeps falling. Instead we are paying for all the other nonsense now built into your premium – deliberately bloated repair costs, outrageously priced "courtesy" car hire, spurious whiplash claims and burgeoning uninsured losses.

The insurance industry wails about it, but is largely at fault itself. It is riddled with perverse incentives, because the person paying the bill often isn't the one managing the repair. If you knock another car, it goes off to their insurer's "authorised" repair yard, which, because it's charging your insurer, has no incentive to keep costs under control. Its incentive is the reverse – it will want to drag out the repair, add in costs and commissions, and offer a ludicrously expensive replacement car while the other one is off the road, and for as long as possible.

The Competition Commission has begun an investigation into the car insurance market, but don't hold your breath. We need a fundamental rethink. UK car insurance looks like US healthcare; super-loaded with costs, but with worse outcomes than countries with socialised medicine. Government, rightly, makes car insurance compulsory, but leaves profligate private providers to manage it. How about a National Car Insurance Service?

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Understanding Car Insurance

By: Denis Yates


Motor Vehicle Insurance Basics

Understanding car insurance is not a subject the majority of people would be the slightest bit interested in. Generally speaking, this is down to the fact that motoring insurance is something you must have, as required by law and, for the better part the only real interest shown in motor vehicle insurance basics is how much it is going to cost.

Cost of Automotive Insurance
If you are one of those people believing that you are the safest person on the road and, therefore need only the least insurance coverage available, you are missing the point.

Basic motor insurance, that which you are required to have by law in most countries, will not necessarily cover you if anyone else is in an accident in which you are involved.

The perfect driving record will not exempt you from getting injured, or, heaven forbid killed, in an automobile accident. The best driving record in the world will not help you from the cemetery.

Being covered for the bare legal minimum of auto insurance, without actually understanding what this means, could leave you open to all sorts of liabilities in the event of an accident.

Knowing more than the basics about motor insurance, will be beneficial in the long run. Having as much information about automotive insurance as you can stand, will at least show you that you need as much as you can get.

Let us imagine that you have just run into a parked car. Do you know whether or not the minimum legal insurance covers you for this? Remembering that this legal minimum can differ from state to state and country.

Understanding Car Insurance Categories
Vehicle insurance coverage basics usually available.

No-fault Law.
With the basic legal minimum of auto insurance, you are covered if you are at fault or not. This will cover your medical costs, up to an amount specified by your particular insurer.

Personal Injury Protection.
Up to an amount pre-determined by your policy and insurer, all of your medical bills, hospital costs, and funeral expenses, will be covered. Included in this, is anybody inside or outside of your car, that were injured as a direct result of the incident.

Bodily Injury Liability.
Any death or injury resulting from an incident you are responsible for as the owner of the car involved, is covered by Bodily Injury Liability. Also covered will be expenses for loss of income, long-term care, hospitalization pain and suffering, rehabilitation, and so on.

Property Damage Liability.
This insurance covers you if you cause damage to someone's property other than your own, with your vehicle. Said property may be in the form of any type of vehicle, any part of a house or the property within it, such as fences, fountains, etc. Property Damage Liability and Bodily Injury Liability are usually combined, depending on your country.

Full Coverage.
Precisely that, full, comprehensive insurance protection.

Uninsured Motorist.
Uninsured Motorist covers injuries to you and any passengers in your car, when the other motorist in the incident is at fault but does not have insurance or, lacks sufficient motor insurance coverage.

Medical Only.
Medical expense for yourself and any passengers, in a car owned by you.

If you can comfortably spare the expense of full, comprehensive, auto insurance coverage, then do so. If your insurance cover is pre-determined by how much your finances can bear, then so be it, there is no shame here.

You need to get the coverage that suits your situation. If you get less than you easily have enough for, in the event of an incident you may find you have ultimately left yourself in the lurch.

Understanding vehicle insurance coverage basics, can only be beneficial to you, should you be caught up in an accident. Being unaware of the differences in the types of automobile insurance coverage available, could leave you in dire straights if you thought all insurance was the same and only got covered for the barest minimum.

The primary reason for this article is to give any reader further information than they may already have, concerning understanding car insurance. This is not a legal document and can not be used as a legal reference, either.

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Curing the Healthcare Crisis

Empowering patients and caregivers

by John C. Goodman, Ph.D.

Designing Ideal Health Insurance

Current insurance models don't utilize such things as informed patients. Published on September 24, 2012 by John C. Goodman, Ph.D. in Curing the Healthcare Crisis

The modern era has inherited two models of health insurance: the fee-for-service model and the HMO model. Both models create perverse incentives for patients and their doctors.

As I wrote in my recent book, Priceless: Curing the Healthcare Crisis, virtually all recent variations on these two models are attempts to ameliorate and control those perverse incentives—usually by introducing features that have a new set of perverse incentives. It is probably no exaggeration to say that the evolution of health insurance is one of cascading perversions, with each new wave of design trying to overcome the bad outcomes of the previous designs.

Under the fee-for-service model, insurance is designed to pay a separate fee for each service rendered, with patients responsible for some portion of the fee— in the form of a deductible, coinsurance or co-payment amount. Under the HMO model, providers receive a fixed fee, irrespective of the amount of service rendered.

When healthcare is perceived as free (the HMO model), patients will have an incentive to consume it until its value at the margin approaches zero. Since the cost of care is well above zero, this implies that unconstrained patients will consume healthcare resources very wastefully. The deductibles and co-insurance that are features of a typical fee-for-service plan are only a small improvement on these distorted incentives. If patients pay 20 percent of the bill, for example, their incentive is to consume care until its value at the margin is worth only 20 cents on the dollar.

On the provider side, the fee-for-service model encourages overprovision— since more service results in higher income for the doctor, hospital or other supplier of care. The HMO model, by contrast, encourages underprovision, since any portion of the fixed fee that is not spent on medical care is available to the providers as take home pay or some other form of compensation.
Readers may wonder why either model was ever found appealing to anyone in the past. The short answer is that both models are the product of the technocratic approach to healthcare I discussed earlier in my book. Both, in other words, ignore economic incentives.
Both models, for example, implicitly assume that (1) the amount of sickness is limited and largely outside the control of the insured, (2) methods of treating illness are limited and well defined, and (3) because of patient ignorance and asymmetry of information, treatment decisions will always be filtered by physicians, who will make decisions based on their own knowledge and experience or clinical practice guidelines. In this way, both models implicitly assume—one way or another—that economic incentives can be ignored.
Although the HMO model is often viewed as the more contemporary, it is actually less compatible with the changes the medical marketplace is undergoing. The traditional HMO model is fundamentally based on patient ignorance. The basic idea is a simple one: make healthcare free at the point of consumption and control costs by having physicians ration care, eliminating options that are judged “unnecessary” or at least not “cost effective.”
But this model works only as long as patients are willing to accept their doctor’s opinion. And that only works as long as patients are unaware of other (possibly more expensive) options.
However, an explosion of technological innovation and the rapid diffusion of knowledge about the potential of medical science to diagnose and treat disease have rendered these assumptions obsolete.
We could spend our entire gross domestic product on healthcare in useful ways. In fact, we could probably spend the entire GDP on diagnostic tests alone—without ever treating a real disease. The new reality is that patients are becoming as informed as their doctors—not about how to practice medicine, but about how the practice of medicine can benefit them. Combine the potential of modern medicine to benefit patients with a general awareness of these benefits and zero out-of-pocket payments, and the HMO model is simply courting disaster. The fee-for-service model is only a slight improvement.
Some believe that managed care and practice guidelines can solve these problems. Imagine grocery insurance that allows you to buy all the groceries you need; but as you stroll down the supermarket aisle, you are confronted with a team of bureaucrats, prepared to argue over your every purchase. Would anyone want to buy such a policy? Traditional health insurance isn’t designed to work much better.
Accordingly, I propose a new approach. It combines an old concept, casualty insurance, with two relatively new concepts: universal Health Savings Accounts (to control demand) and a proliferation of centers of excellence or “focused factories” (to control supply). I will be posting more on this later. I believe this is the approach that would naturally emerge if we relied on markets, rather than regulators, to solve our problems.

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Health Insurance Tax Penalty to Hit 6 Million Americans

By Robert Longley, About.com GuideSeptember 21, 2012

Nearly 6 million mainly middle-class Americans -- 2 million more than first estimated - will be required to pay an average tax penalty of $1,200 in 2016 because they failed to buy health insurance as required by the health care reform law, according to an updated report from the nonpartisan Congressional Budget Office (CBO).

The latest numbers nearly double the CBO's original estimate of 4 million penalty payers issued in 2010, shortly after passage of the Affordable Care Act, part of which requires all Americans to be covered by health insurance by 2016 or pay a penalty on their income tax.

The CBO attributes the drastic increase mainly to the effects of legislation passed since 2010 and the fact that the double whammy of higher unemployment and lower household income has left more Americans financially unable to buy health insurance.

In addition, notes the CBO, the recent Supreme Court decision upholding the health care reform law will also increase the number of people expected to pay the penalty.

"As a result of that decision," states the CBO, "some states will not expand their Medicaid programs at all or will not expand coverage to the full extent authorized by the Affordable Care Act. Such state decisions are projected to increase the number of uninsured, a small percentage of whom will be subject to the penalty tax."

The CBO estimates that almost 80% of the 6 million people required to pay the penalty in 2016 will have incomes of $55,850 or less for individuals and $115,250 or less for families of four.

While about 30 million nonelderly people will remain uninsured in 2016, the majority will not be subject to the penalty tax, according to the CBO. Unauthorized immigrants, members of Indian tribes and persons with incomes low enough that they are not required to file income tax returns are all exempt from the requirement to buy health insurance. In addition, persons whose insurance premiums would exceed a legally specified percentage of their income will not be subject to the penalty. Others will be granted exemptions because of hardships or their religious beliefs.

The CBO estimates the government will take in almost $7 billion in payments of the health insurance tax penalty in 2016, and about $8 billion per year over the 2017 - 2022 period.

Under the Affordable Care Act, money raised from the tax penalty must be used mainly to fund government subsidies to help middle- and low-income persons pay for health insurance.

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Choosing health insurance tougher than parenting decisions

By Mark Chalon Smith
Posted : 09/20/2012


How difficult is it to choose health insurance? It's more challenging than parenting.

Let Insurance.com help you find affordable health insurance now.

That's the word from Aetna, which recently released its Empowered Health Index Survey findings. The poll of 1,500 people nationwide showed that picking the right medical coverage for individuals and families was the second-hardest "major life decision," with only funding retirement more of a challenge.

"Survey participants reported that choosing health care benefits is more difficult than purchasing a car, making decisions about medical tests or treatments, parenting and selecting homeowners, renters or auto insurance," Aetna said in a statement.

Why are people so intimidated? Aetna offered three reasons:
88 percent of those interviewed said the available information is confusing and complicated.
84 percent complained that health plans provide conflicting details.
83 percent said that, in the end, it can be too hard determining which plan is best for them.

"The survey results showed that consumers understand the importance of health benefits. However, they don't feel they have the resources they need to make an educated decision," Mark Bertolini, Aetna's chairman, CEO and president, said in a statement. "We need to make the process of choosing and using health benefits easier for consumers." (See: "Open enrollment: 5 tips for selecting the best benefits.")
Most support health reform, but many can't explain it

The survey touched on other noteworthy elements, including health reform:
More than 75 percent believe the key features of health reform are important for them and their families. But 41 percent stressed that they need more information to understand its impact.
While trimming medical costs is a major political and social issue, many people don't closely monitor their own costs. Forty-three percent rarely or never track how much they spend on out-of-pocket health expenses.
Forty-one percent have skipped a dose of prescribed medication, stopped taking medication or delayed a needed medical procedure because of associated costs. Seventy-six percent of people in fair or poor health and 57 percent with chronic conditions are the most likely to do so.

Meanwhile, the cost for workplace-based family health insurance rose by 4 percent in 2012, while wages climbed a mere 1.7 percent, according to a recent study by the Kaiser Family Foundation. The annual cost for family health coverage was $15,745 in 2012, with workers paying an average of $4,316 in premiums, according to Kaiser. (See: "Group health insurance premiums up 97% since 2002.")
Health insurance open enrollment decisions looming

The anxiety may rise this time of the year as open enrollment for employer-based medical plans is usually offered to workers in the fall. It's the time to gather relevant facts and spend the hours needed to learn which coverage is the most cost-effective while offering the best protection, says Wendy Shanahan-Richards, Aetna's national medical director and co-author of "Navigating Your Health Benefits for Dummies."

These 10 basic steps may not be as fun as leafing through shiny new car brochures, but Shanahan-Richards says they can help:
Make sure you understand terms such as "deductible," "co-insurance," "premium," "in-network" and "health savings account."
Don't just think of yourself. Consider how your family members will be covered when reviewing your plan and its benefits.
Make a list of your current and future medical needs. The list could include prescription drugs or any planned surgeries or health care procedures for the upcoming year.
Follow up on your own list and ask your doctor or office staff about tests, medications, consultations and other services you may need during the next year.
Determine which coverage worked best for you in the past. That plan may still work. However, if you've had a big life change -- getting married, having a baby, retiring -- then re-think your needs.
Review problems you had with previous plans. The open enrollment period is a good time to learn more about benefits you wish you had in the past.
Review all open enrollment materials your employer provides. Learn how the benefits plans will change from this year to next.
Know the deadline for making a decision. Give yourself enough time to choose your coverage before the date approaches.
Ask your employer for more details if you don't understand the plans offered. Many workplaces have open enrollment meetings and other resources to help clarify options.
Cost is obviously one of the top factors when picking coverage. Make sure you know all the expenses tied to your plan, not just the premiums.

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2012 Insurance Awards

Best Insurance Company, Argentina
QBE Seguros

Best Insurance Company, Austria
Assicurazioni Generali

Best Insurance Company, Bahrain
Bahrain National Holding Company

Best Insurance Company, Belgium
AXA

Best Insurance Company, Brazil
ACE Seguradora

Best Insurance Company, Bulgaria
DZI

Best Insurance Company, Canada
Intact

Best Insurance Company, Caribbean
Seguros Banreservas

Best Insurance Company, Chile
Asociación Chilena de Seguridad

Best Insurance Company, China
Ping An Insurance

Best Insurance Company, Colombia
Previsora Seguros

Best Insurance Company, Croatia
Allianz

Best Insurance Company, Czech Republic
Komerční Pojišt’ovna

Best Insurance Company, Denmark
Topdanmark

Best Insurance Company, Ecuador
Ace Seguros

Best Insurance Company, Egypt
Misr Insurance Company

Best Insurance Company, France
BNP Paribas Cardif

Best Insurance Company, Finland
Sampo Group

Best Insurance Company, Germany
Allianz

Best Insurance Company, Greece
InterAmerican Group

Best Insurance Company, Hong Kong
AIA

Best Insurance Company, Hungary
ING Life Insurance

Best Insurance Company, India
New India Assurance

Best Insurance Company, Indonesia
PT Asuransi Jiwasraya (Persero)

Best Insurance Company, Italy
Intesa Vita

Best Insurance Company, Ireland
Aviva

Best Insurance Company, Jordan
Arab Orient Insurance

Best Insurance Company, Kazakhstan
Eurasia Insurance

Best Insurance Company, Kuwait
Gulf Insurance Company

Best Insurance Company, Lebanon
MedGulf

Best Insurance Company, Luxembourg
Groupe La Luxembourgeoise

Best Insurance Company, Malaysia
Kurnia Insurans Berhad

Best Insurance Company, Mexico
Qualitas Insurance

Best Insurance Company, Morocco
CNIA SAADA Assurance

Best Insurance Company, Netherlands
Menzis

Best Insurance Company, Norway
SpareBank 1

Best Insurance Company, Oman
Al-Ahlia Insurance

Best Insurance Company, Pakistan
EFU Life

Best Insurance Company, Peru
Rimac Seguros

Best Insurance Company, Philippines
Chartis

Best Insurance Company, Poland
PZU

Best Insurance Company, Portugal
BES Vida

Best Insurance Company, Qatar
QIC Group

Best Insurance Company, Russia
Ingosstrakh

Best Insurance Company, Saudi Arabia
MedGulf

Best Insurance Company, Serbia
UNIQA osiguranje

Best Insurance Company, Singapore
AIA

Best Insurance Company, Slovakia
Generali Slovensko

Best Insurance Company, Slovenia
Triglav

Best Insurance Company, South Africa
Hollard

Best Insurance Company, South Korea
Samsung Life Insurance

Best Insurance Company, Spain
VidaCaixa Grupo

Best Insurance Company, Sri Lanka
Sri Lanka Insurance Corporation

Best Insurance Company, Sweden
Avanza Bank

Best Insurance Company, Switzerland
Zurich

Best Insurance Company, Taiwan
Fubon Life Insurance

Best Insurance Company, Thailand
Viriyah Insurance

Best Insurance Company, Turkey
Groupama Sigorta

Best Insurance Company, Ukraine
AXA

Best Insurance Company, UAE
Oman Insurance Company

Best Insurance Company, UK
Legal & General

Best Insurance Company, USA
MetLife

Best Insurance Company, Venezuela
Seguros Mapfre

Best Insurance Company, Vietnam
PetroVietnam Insurance

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Big Data + Machine Learning in Insurance

I’ve posted in the past about how Big Data + Machine Learning is disrupting lending, and about how this disruption in financial services often comes from below, from startups targeting the unbanked. The Economist notes that big data + machine learning is changing underwriting at even big insurers:


At least two big American life insurers already waive medical exams for some prospective customers partly because marketing data suggest that they have healthy lifestyles, says Tim Hill of Milliman, a consultancy that advises insurers on data-mining software systems.


The software picks up clues that are unavailable in medical records. Recklessness in one part of someone’s life is a pretty good signal of risk appetite in others, for example. A prospective policyholder with numerous speeding tickets is more likely than a safer driver to end up with a sports injury. The software also detects obscure correlations. People who frequent ATMs so they can make cash payments tend to live longer than those who prefer writing cheques or paying with credit cards, it turns out. People with long commutes tend to die younger. Why this should be is not clear: some speculate that ATM users tend to be more spontaneous types, who like to have cash in their pocket and whose lifestyle may be more active; others hypothesise that sedentary commutes mean less time to do something healthy in the evening.


Interestingly, the advantage in using new sources of data to underwrite appears to lie more in cost reduction and speed to decision than accuracy:


But manual underwriting with medical tests can cost hundreds of dollars and, according to one estimate, drags on for an average of 42 days in America and Europe. That gives potential customers ample time to talk to a competitor or walk away. Automated underwriting can cost a tenth as much and be done once a human reviews the software’s recommendation.


Much of this is still in the anecdotal and experimental stage, but it is exciting to see that even big insurance companies can embrace new ideas.


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