Why is Car insurance so expensive ?

Car insurance is expensive for young people because:
1. young people make more claims;
2. the average cost of claims from young people is higher than from older people;
3. the insurance companies know they can rip you off because you have to insure SOMEWHERE;
4. the motor repair industry is as corrupt as the insurers and bumps up repair costs;
5. too many people lie about personal injuries and claim compensation;
6. if the insurance companies can't rip you off, they don't care about losing your business.

Affordable car insurance is almost impossible to find for most drivers and renewal premiums seem to rise and rise.

The Insurance Blogger asks why the cost is so high when motor insurance companies are losing money.

According to the latest figures from the Financial Services Authority, motor insurers are paying out £1.20 in claim settlements for every £1 they collect from drivers.

The cash to cover the claims gap previously came from returns on investments, but with interest rates so low, the firms are looking to rake in the shortfall from customers by raising prices.

Some of the factors that put the price of car insurance up are beyond the control of motorists – but they can cut some costs if they want:

Lawyers cash in on easy money

The Association of British Insurers (ABI) looked at 50,000 low value road accident claims from September 2009 to March 2010, and found that for every pound paid in compensation, 87p was paid in legal costs.

Drivers are paying £2.7 million a day to lawyers through their motor insurance premiums – or £41 per motor insurance policy per year.

Crooked drivers cheat the rest

The ABI uncovers 108 fraudulent car insurance claims every day. The AA estimates fraud is a problem that adds £80 to the cost of every policy.

Third party cover is not cheap car insurance

This is often a false economy. Drivers with third party fire and theft cover statistically have more accidents than other drivers, increasing the risk for insurers and pushing up costs. Some third party policies cost more than comprehensive cover for the same driver and the same car.

Spreading the cost is not a cheap option

Most car insurers will cut the cost of your policy if you pay up front rather than in instalments. Finding cheap car cover and then paying by direct debit is often adding rather than saving money.

Protecting a no claims bonus

This is a damned if you do, damned if you don’t option. A no claims bonus can bring down the cost of car insurance, but protecting a no claims bonus does not mean a premium will not increase as the result of a claim.

Taking cover that’s not needed

Many motorists do not read their policy documents and renew cover without realising they are paying for options they do not use or need. Free roadside repair cover on a new car already covered for breakdown by the maker is an example.

These figures show that the best way of finding cheap car insurance is to check out policy terms and conditions and then shop around for the best deal that offers the cover you really need.