A different insurance model - real world example
Discussion
There is a lot of discussion regarding rising premiums at the moment, and unfortunately this disproportionately affects younger drivers and those who are least able to pay high premiums in the first place.
My thoughts are that this will lead to more uninsured drivers as some will just not be able to afford to insure, but still need to drive. Illegal yes, but still probable.
I was looking at buying and insuring a car in another country where I spend part of the year and their insurance setup is quite interesting. There is a mandatory insurance premium that everyone has to pay set at a fixed, very affordable rate regardless of driver or vehicle. This pays into a central fund that covers (limited) injury claims etc. arising from accidents. Drivers then have a choice to insure privately to cover themselves / vehicles at various levels of cover. This struck me as a good idea and one borne of premiums that would be too high if every driver was forced to fully insure.
Thoughts? Any other alternative models known to work in other markets?
My thoughts are that this will lead to more uninsured drivers as some will just not be able to afford to insure, but still need to drive. Illegal yes, but still probable.
I was looking at buying and insuring a car in another country where I spend part of the year and their insurance setup is quite interesting. There is a mandatory insurance premium that everyone has to pay set at a fixed, very affordable rate regardless of driver or vehicle. This pays into a central fund that covers (limited) injury claims etc. arising from accidents. Drivers then have a choice to insure privately to cover themselves / vehicles at various levels of cover. This struck me as a good idea and one borne of premiums that would be too high if every driver was forced to fully insure.
Thoughts? Any other alternative models known to work in other markets?
Edited by Joelonghair on Friday 17th November 21:41
Sounds like Australia.
But does it actually work?
The cost of an accident is the same, it is just one driver only has cover for part of it. If you have an accident involving someone with only the basic mandatory injury cover then who picks up the cost of the rest of the claim?
The licensing system puts restrictions on number of passengers, driving after dark, 0 blood alcohol etc for the first few years and bans driving of high powered vehicles (using a provisional license). Maybe those controls keep accidents and therefore costs down?
I just ran a fully comp quote through AAMI for an 18 year old male (can’t pass your test until you are 18) and a 3 year old Fiesta ST, used to commute and parked in central Melbourne up to 4 days a week (so travel to Uni). Using an exchange rate of 0.5 £ to $:
Car value £15k
Excess £900 + £200 because under 25
Premium £1350
Change that to a 10 year old 1.6 Fiesta worth £4k and the premium drops to £1050.
Change to a 20 year old on that car and it is £750.
How does the UK compare using an address in Bath and commuting to Bristol?
But does it actually work?
The cost of an accident is the same, it is just one driver only has cover for part of it. If you have an accident involving someone with only the basic mandatory injury cover then who picks up the cost of the rest of the claim?
The licensing system puts restrictions on number of passengers, driving after dark, 0 blood alcohol etc for the first few years and bans driving of high powered vehicles (using a provisional license). Maybe those controls keep accidents and therefore costs down?
I just ran a fully comp quote through AAMI for an 18 year old male (can’t pass your test until you are 18) and a 3 year old Fiesta ST, used to commute and parked in central Melbourne up to 4 days a week (so travel to Uni). Using an exchange rate of 0.5 £ to $:
Car value £15k
Excess £900 + £200 because under 25
Premium £1350
Change that to a 10 year old 1.6 Fiesta worth £4k and the premium drops to £1050.
Change to a 20 year old on that car and it is £750.
How does the UK compare using an address in Bath and commuting to Bristol?
I disagree with socialised insurance, but I think there has to be some sort of smoothing priced in.
I passed my test just before the financial crisis and insurance was around £800 for me and my friends at 18/19 years old.
6 months later new passes were being charged well over £2k.
Purely down to crap financial decisions as far as I can tell. And it looks to be the same as what is going on now. New drivers bearing the brunt of the price hikes.
I passed my test just before the financial crisis and insurance was around £800 for me and my friends at 18/19 years old.
6 months later new passes were being charged well over £2k.
Purely down to crap financial decisions as far as I can tell. And it looks to be the same as what is going on now. New drivers bearing the brunt of the price hikes.
otolith said:
It really comes down to whether you think that lower risk drivers should subside higher risk drivers, and whether you think that personal accountability for accidents and convictions reflected in higher future premiums reduces risky behaviour.
This. Son of a friend is a nice enough kid but has already written off 4 cars aged 19. Why should the rest of us subsidise that sort of f
kwittery??I've encountered the sort of policy referred to in the OP, I think. Every vehicle is subject to a nominal annual insurance charge, but when an accident happens, it is up to the parties involved to agree liability on the spot i.e. if I have driven into your car, we have to both agree that I am at fault and then sketch out an arrangement for me to fully compensate you. The incentive to sort things out on the spot is that, if there is no agreement, all affected vehicles will be impounded until it goes to court. That obviously inconveniences everyone, can take months, and often the vehicles are eventually returned in a worse state than when they were impounded.
That was the case in Sri Lanka, and I think it may be similar in some other south Asian countries.
That was the case in Sri Lanka, and I think it may be similar in some other south Asian countries.
Bill said:
otolith said:
It really comes down to whether you think that lower risk drivers should subside higher risk drivers, and whether you think that personal accountability for accidents and convictions reflected in higher future premiums reduces risky behaviour.
This. Son of a friend is a nice enough kid but has already written off 4 cars aged 19. Why should the rest of us subsidise that sort of fkwittery??Wacky Racer said:
To have one may be regarded as a misfortune, to have two looks like carelessness, to have three looks like bad luck, to have four looks like wtf!!
Yeah, he doesn't have any concept of fear or backing off. Age 12 I caught him coming down a fairly steep b-road flat out with a wobble on on a scooter. 
Donbot said:
I disagree with socialised insurance, but I think there has to be some sort of smoothing priced in.
I passed my test just before the financial crisis and insurance was around £800 for me and my friends at 18/19 years old.
6 months later new passes were being charged well over £2k.
Purely down to crap financial decisions as far as I can tell. And it looks to be the same as what is going on now. New drivers bearing the brunt of the price hikes.
It's not just new drivers bearing the brunt of it. I'm not a new driver (been driving 40+ years) & my premium doubled this year. I passed my test just before the financial crisis and insurance was around £800 for me and my friends at 18/19 years old.
6 months later new passes were being charged well over £2k.
Purely down to crap financial decisions as far as I can tell. And it looks to be the same as what is going on now. New drivers bearing the brunt of the price hikes.
Full no claims, no accidents/claims, no convictions etc etc.
Double not much isn’t much, though. The impact of a general increase is greater on people who could barely afford the cost as it was. Still, it really comes down to whether you can afford to indemnify yourself for the risk you pose to others. If you can’t, you can’t afford to impose that risk.
otolith said:
Double not much isn’t much, though. The impact of a general increase is greater on people who could barely afford the cost as it was. Still, it really comes down to whether you can afford to indemnify yourself for the risk you pose to others. If you can’t, you can’t afford to impose that risk.
Over £1k, so it's not insignificant to start with.It’s a nice idea for those who get cheaper insurance but a terrible idea for those who will be effectively penalised to pay for the reduction of others in a bid to find a common ground… like any form of socialisation.
Figures are not plucked out of thin air… Insurance works by pooling risk and everyone in that pool paying a ‘fair premium’ for the risk they bring to it…
When I was a 17 year old in a 106 Quicksilver I brought a much larger risk to the party than my mum with no claims in 40 years driving a 1l Yaris… so it’s only right I pay a higher premium.
It may seem mad that a 17 year old pays £3k to insure their car for a year but if 17 year old me came up to today me and said ‘I will give you £3k now… but if I have a crash, you have to pay to replace my car, the cost of any car(s) or buildings I may crash into, compensate any injuries I cause, defend any legal claims and provide me another car to use until I get a new one’…
I may be a gambling man but I’d tell me to keep the £3k!
Figures are not plucked out of thin air… Insurance works by pooling risk and everyone in that pool paying a ‘fair premium’ for the risk they bring to it…
When I was a 17 year old in a 106 Quicksilver I brought a much larger risk to the party than my mum with no claims in 40 years driving a 1l Yaris… so it’s only right I pay a higher premium.
It may seem mad that a 17 year old pays £3k to insure their car for a year but if 17 year old me came up to today me and said ‘I will give you £3k now… but if I have a crash, you have to pay to replace my car, the cost of any car(s) or buildings I may crash into, compensate any injuries I cause, defend any legal claims and provide me another car to use until I get a new one’…
I may be a gambling man but I’d tell me to keep the £3k!
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