How having insurance can still leave you with that sinking feeling
All insurers require customers to pay the first part of
any claim – usually ￡50 or ￡100 – to weed out trivial and frivolous claims. However, some customers are finding there is a sting in the tail: premiums can rise sharply at renewal simply because they have had the temerity to make a claim.
The figures can be quite alarming. One Telegraph reader found his motor premium more than doubled, from ￡300 to almost ￡800, after being involved in a minor shunt.
Much will depend on the claim submitted. Large claims can result in premiums being increased – particularly if the size of the claim exceeds the previous premiums that were paid.
And some claims may cause an insurer to re-rate the basis on which it is insuring you; this often happens, for example, following a series of flood claims.
Carmel McCarthy, a spokesman for the insurer More Than, says: “The way that insurers calculate premiums has become increasingly sophisticated in recent years. Our approach is to ensure that all customers pay a fair price based on their own individual circumstances.”
She says the company will look at a person’s age, address, type of car or home, claims record, the number of products they have, and how long they have been insured with the company when calculating premiums.
A claim can affect renewal premiums, she says, although it is not a simple calculation where one claim will push premiums up by 5 per cent or 10 per cent.
“Whether their premium will increase after a customer makes a claim will depend upon the type and severity of the claim, whether they have made other claims in the past, as well as all the individual factors outlined above.”
Anyone unfortunate enough to put in two or more claims within a five-year period will almost certainly see premiums rise, as insurers will rate you a “higher risk“.
A motorist who puts in two or more claims within five years is likely to be classified as a careless driver, even if they were not at fault in either claim.
Sadly, underwriters’ systems do not take into account a run of bad luck that can blight some unfortunate homeowners and drivers. However, there may be other reasons why premiums increase on renewal.
A spokesman for Norwich Union says that many motorists fail to appreciate the extent to which their no claims discount lowers the premium. Once they have made a claim this discount disappears, pushing up premiums significantly.
The ABI says there are a whole range of factors taken into account when setting renewal premiums. These include insurers’ claims costs.
Last year, insurers’ costs soared following floods that devastated many parts of the country and many homeowners have seen premiums rise.
Eric Galbraith, the chief executive of the British Insurance Brokers’ Association, says: “Customers shouldn’t see premiums rocket simply because they have made a claim, particularly if they have been loyal customers with the insurer for a number of years.”
So should customers avoid claiming where possible?
Peter Gerrard, the head of insurance at the price comparison site Moneysupermarket.com, says: “Don’t claim unless you have to. If possible, meet all smaller damage claims yourself. The insurance policy should be a last resort.”
Another possibility is to take a larger excess – this can lower premiums and is one option to consider following a claim.
Gerrard says: “If you do need to lodge a claim, make sure you shop around at renewal. Other companies may offer more competitive options.”
Do not be tempted to lie about your past: insurers exchange information on claims and this highrisk strategy will leave you both uninsured and unprotected should real disaster strike.
Galbraith says: “Many people who buy through an insurance broker may be better protected against such price hikes. If it looks unfair the broker may be in a position to challenge the premium with the insurer.”
Tags: address type, careless driver, chief executive, Circumstances, companies, customers, flood, frivolous claims, Information, insurance, Insurance Policy, insurer, Premium, premiums, Protected Against, risk, severity, spokesman, sting in the tail, telegraph, temerity, underwriters
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