03-06-2016

According to a new study, the majority of British drivers don't understand how motor insurance is calculated and want it made easier to understand.

Demystifying the Insurance Industry

A study of 2,000 motorists polled by Co-op Insurance has found that:

• 51% don't understand how policy prices are calculated.
• 86% think insurance should be made easier to understand.
• 42% didn't know motor insurance provides cover if another driver claims personal injury compensation following an accident.
• 36% are confused by policy ad ons.
• 28% don't understand what is covered by a policy and 39% don't know what isn't covered.
• Two fifths of people don't understand why prices fluctuate year to year.
• A third of people are unaware how their choice of vehicle affects the cost of insurance.

James Hillon, Products and Pricing Director at Co-op Insurance, said:

"Motor insurance can be complex and the research has found that drivers are often confused by it.

"We want to keep communities safe and we hope that by explaining insurance it will help drivers to understand the value they get and reduce the chances of them deciding to go without insurance. Uninsured drivers have an impact on the cost of insurance generally, and can also lead to really unfair situations on honest road users if they are involved in an incident."

Understanding What You're Paying For

So, what does your car insurance fee pay for and how is it calculated? Well, the cost of your insurance is based on how many people similar to you have had to make a claim and how much each of these cost to put right. This will factor in elements such as:

• The cover of expenses incurred, such as damage to your car, another vehicle or property.
• The cost of medical compensation should another person be harmed as a result of your actions.
• Company running costs and profits.
• The government Insurance Premium Tax.

This structure is similar for all kinds of insurance policies, whether you're taking out cover for your car or HGV, office or building site.

The value you are charged is also likely to be influenced by the type of insurance and the people who will be covered. This is evaluated by looking at factors such as life history (previous claims or convictions), age and health. For example, a premium will undoubtedly be higher for an inexperienced 18 year old, when compared to a 40 year old with decades of experience.

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