Away from the financial markets, and assuming that we will won’t all be selling out cars next week because of a 1929-type stockmarket collapse, car insurance premiums look set to rise.

This is the view of Defaqto insurance consultant, Mike Powell, whose recently published report  on the car  insurance market, “Difficult Times Ahead,” comes to the conclusion that the current, the highly competitive level of car insurance premiums is simply unsustainable.

In 2007, insurers made a loss on motor insurance for the thirteenth consecutive year. Insurers took in £10.5bn in premiums, but with £8.2bn paid out in claims, and with the cost of administration and commissions added on, insurers made a loss of £263m last year.

According to consultants, Deloitte, insurers had to release £1bn from prior year reserves in order to stem these underwriting losses.

So why have insurers allowed this state of affirs to continue for so long? The answer, according to Mike Powell is that car owners are great for selling other insurance products to.  If you own a car, you will probably have other things you want to insure such as your house and its contents, travel, pets and so on.

Another reason is that car owners are very cost sensitive and are willing to shop around online to get the cheapest premium.  Aggregator web sites have enabled car owners to compare multiple quotes, making it difficult for insurers to raise their premiums.

However, the situation may have reached a tipping point because of the rise in personal injury claims which is costing insurers a small fortune.

Powell says: “If it continues like this, how long will insurers be able to stay in the market?

“Providers will either have to raise their premiums or withdraw from the market. In any case, cheapest is not always the best. It’s only whenyou come to make a claim that you know whether you policy is any good.”

Visit Defaqto’s unique car insurance comparison tool:
http://www.defaqto.com/consumer/insurance/motor/compare-car.aspx

Read the Defaqto guide to car insurance:
http://www.defaqto.com/consumer/insurance/motor.aspx

As the holiday season reaches its peak, millions of holiday makers will be taking to the roads this weekend, but if you’re going abroad, it’s essential to check out whether you sufficient cover.

Tescocompare.com, the car and home insurance comparison site, shows that while price remains the most important factor for over two thirds (70 per cent) of people shopping around for car insurance, simply choosing the cheapest cover may be a false economy when it comes to driving abroad.

Tescocompare.com warns that while most policies offer some sort of cover for driving abroad, some insurance providers  cover drivers for up to three days, with third party only, at which point it becomes your responsibility to take out further insurance.

Other insurers, however, will automatically include fully comprehensive cover for up to 90 days.

But understanding the differences in cover provided could save you money over the long term. Opting to pay as little as £45 more per year, means that those who drive regularly in the EU can benefit from up to 90 days free cover with insurers such as Diamond, Lloyds TSB and Kwikfit Insurance.

However,  you need to examine your policy terms as some policies will default to third party cover only, rather than comprehensive.

Paul Baxter of Tescocompare.com, says: “Less expensive insurers may quote a low premium for the year. But when extra foreign cover is charged at a high rate, initial  savings can be cancelled out by the cost of add-on items.

“While you may think third party cover is enough, if you are involved in a shunt in a rural Spanish village, you’ll soon realise that having comprehensive cover is a necessity. So be sure to investigate all the policy details before you commit to a premium.”

Tescocompare.com allows consumers you to compare 25 different policies on the basis of both features and premiums and in June this year was rated the best car insurance aggregator by Defaqto.

Tescocompare.com differentiates itself from other aggregators by the fact that the premium quoted will be the price that you pay, assuming that you don’t change the level of cover you need when you click through to the insurer. Also, the price quoted on Tescocompare.com will be the same or cheaper than if you bought direct from the insurer.

Defaqto insurance principal, Mike Powell, says:  “To compare cover features in depth, the Defaqto Compare Tool is second to none as it carries details of 213 comprehensive car insurance policies. So car owners can compare premiums via Tescocompare.com and then do an in-depth comparison of a number of policies using the Defaqto Compare Tool:

http://www.defaqto.com/consumer/insurance/motor/compare-car.aspx

Research by car insurer LV= has found that over half of all motorists don’t understand their insurance cover and, as a result, could be breaking the law.

The insurer has compiled a list of the  seven of the most popular misconceptions and urges motorists to bear these in mind when buying or renewing motor cover or risk in order to avoid suffering a rejected claim.

MYTH 1:  “If I have comprehensive cover, anyone can drive my car”
 
FACT: If you lend your car to someone else who is not named on your policy, you need to ensure they have comprehensive insurance in their own name that includes a “driving other cars” clause. Otherwise, they will be uninsured. 

Even if they do have comprehensive insurance in their own name, they will still be covered for third party only when driving someone else’s car and you will not be covered for any damage they cause to your vehicle. 

If they have no insurance in their own name, they could be convicted of driving while uninsured and receive up to six points and a significant fine.
 
MYTH 2: “Unless I am at fault in an accident, my no claims discount will remain the same.”

FACT:  It’s important to remember that a ‘no claims discount’ does not mean ‘no blame discount,’ so if you make a claim, your discount will be affected, even if you are an innocent party to the event. (The exception to this is where the other party admits liability in an accident). 

An example of where the innocent motorist is penalised is if their  car is stolen or  hit by another motorist whilst parked and they did not leave their details.
 
MYTH 3: “Third party car insurance is much cheaper than comprehensive insurance.”

Fact: Drivers who take out third party cover are more likely to make a claim on their insurance than drivers who take out comprehensive cover.

Emma Holyer, press officer at LV= says: “It is younger, higher risk, drivers who tend to buy only third party cover and because they make more claims, the difference in cost between the two type of cover is minimal. For this reason, some insurers, such as NU, have stopped offering third party cover altogether.” 

MYTH 4: “Restricting my car insurance policy to just myself will make it cheaper.” 

FACT: Adding a spouse or partner often reduces the premium, because married people or those living with a partner are statistically less likely to be involved in an accident.
 
MYTH 5: “If my car is being paid for with a personal loan, the insurance will cover the cost of paying back the loan if the car is written off in an accident.”

FACT: Your insurance will payout for the value of the car at the time of the accident. But because cars depreciate quickly, the payout may be substantially less than the original cost of the car and the size of loan taken out to pay for the vehicle.

MYTH 6: “If my car is a write off following an accident and I decide not to buy another car with the money I claim, I will get back the remaining insurance premium for the rest of the year.”

FACT: A car insurance policy is agreed at the outset for a period of 12 months and once you have claimed for a write-off, the insurer has fulfilled its part of the contract, so no balance of premium will be returned  to the insured. 

However, if you replace the written-off vehicle with another car with the same insurance rating, then your premium will remain the same, and any no claims bonus will remain in place, for the rest of that policy year.

MYTH 7: “Courtesy cars come free with most car insurance policies and are provided in the event of the car being written off or if the car is stolen.” 

FACT: Many policies offer a ‘free courtesy car’ but it is often provided by the garages on their network and you may only receive one if your car is being repaired, and not if it is written off or stolen. 

Other insurers offer a courtesy car as an optional extra, in which case, you are guaranteed a car in the event of any claim.
Mike Powell, Defaqto insurance principal comments: “If you couldn’t manage without your car, it is best to go for this option. If you have a high class vehicle, some insurers offer  ’enhanced courtesy cars.’ Other extras to check out when purchasing cover  are child seat cover and legal expenses.”
 
Take a look at the Defaqto car insurance Compare Tool which enables you to analyse policies in detail:
 http://www.defaqto.com/consumer/insurance/motor/compare-car.aspx