Why is Third Party insurance more expensive than Fully Comp?
Discussion
Just getting some prices off the meercat site for a shed I'm going to look at. A 2000 Volvo V70, full comp coming up at just over £200, TP only coming up at almost 3x that amount. My thinking is I wouldn't want to risk my no claims for a £400/£500 payout after excess is taken into account. So I thought I'd save money and go third party, I expect this lowers the risk to the insurance company, did I miss something?
Various reasons.
Firstly, 85% of all claim costs come from tp claims, so the reduction is never going to be that great these days anyway.
Next, on an older car you get and "age of car" discount on comp due to the lower total loss payout they will make, which you don't get on tp because they aren't covering your own damage. The comp rate less this discount can be lower than the tp rate.
Also, the risk profile. Tp cover is selected by those who have less money. They are less attractive customers, with no opportunities to cross sell, more likelihood pf defaults on payments, more chance of fraud, etc etc.
A combination of all these factors means comp is often the cheapest cover.
Firstly, 85% of all claim costs come from tp claims, so the reduction is never going to be that great these days anyway.
Next, on an older car you get and "age of car" discount on comp due to the lower total loss payout they will make, which you don't get on tp because they aren't covering your own damage. The comp rate less this discount can be lower than the tp rate.
Also, the risk profile. Tp cover is selected by those who have less money. They are less attractive customers, with no opportunities to cross sell, more likelihood pf defaults on payments, more chance of fraud, etc etc.
A combination of all these factors means comp is often the cheapest cover.
As above the root cause is probably a variety of things but from the insurers' point of view, I rather suspect that as prices drifted closer together, so few people took third party cover that the confidence intervals on the statistical samples from which they draw their policy prices grew so wide for TP that whichever interval they draw their policy price from was actually higher than fully comp.
Igurisu said:
Cheers guys, I guess the demographic of people who want to take tp cover is probably a main reason.
Hmmm, what does that say about me?
Which is just bizarre because that demographic as you call it will simply move to FC as it's cheaper - they maybe poor but they're not stupidHmmm, what does that say about me?
I suspect it's a statistical anomaly in their calculations and will fluctuate the other way over the next few years
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