• Car
• In: Car Rev

Insurance Companies Omitting Additional Features in Order to Cut Costs

The majority of insurance companies are omitting elements their car insurance packages which used to come as standard in an effort to cut costs.

This is resulting in the loss of important additional features such as breakdown cover and legal assistance, in most cases without it being highlighted to the car insurance customer.

Omitted features
One of the features most commonly removed or reduce features is breakdown cover, which used to be included as standard on the majority of insurers policies. A number of motorists have been caught out by this, taking their cars on long journeys and even abroad in some cases under the assumption that they will be covered. This has left these motorists in financial hardship, as they have been forced to recover the vehicle using their own money.

Equally as worryingly, insurers have also been omitting European car insurance cover from their packages. Most insurance companies used to include 21 days cover for motorists as standard. However, this has now been taken out by a large number of insurers in a further attempt to cut costs.

Increasing expenditure
The AA has reported that car insurance prices have risen by 40% this year alone, with the average driver now paying £892 ($1,451) per year. This has become an area of increasing concern for the government, with 5% of the motorists questioned as part of a MoneySupermarket.com survey claiming that they had been forced to give up driving all together on the back of insurance and fuel price increases.

Continuous Insurance Enforcement (CIE) has therefore been introduced by the government in an attempt to combat this problem. This means that car owners who are found to be uninsured will immediately be issued with a £100 ($163) fine and faces the prospect of having their vehicle confiscated. It is hoped that this will eradicate a problem which the Motor Insurers Bureau believes is costing the UK insurance industry £500 million ($813.5 million) every single year.

However, insurance fraud has also be named as a possible culprit for insurance price rises, with the Association of British Insurers (ABI) claiming that 133,000 false claims were made over the course of 2010 in the UK alone. It is believed that this is costing the insurance industry a devastating £919 million ($1.5 billion) annually.

Justice Secretary Kenneth Clark is hoping to reduce this problem by banning the advertisement of ‘no win, no fee’ legal services on television, with Clark believing the number of fraudulent claims being made has risen in recent years due to a growing consumer belief that their will be no reprisals if any claims they make are not entirely based in fact.

Recovering increased expenditures
Although there are plans in place to address this problem, the effects of these changes will only truly be felt in the longer term. In the meantime insurers have got to account for a shortfall of approximately £1.4 billion ($2.3 billion) over what they should rightfully be earning.

Naturally, the only way that insurance company’s can remain profitable and hence stay in business is by targeting customers. This is resulting in the omission of elements of the package such as breakdown cover which previously came as standard in order to derive cost savings, as well as an increase in basic car insurance premiums.

Read the small print
Industry experts are therefore advising all motorists to check the small print of their policies before agreeing to a deal, and urging them to remember that the cheapest deal is not always the best value for money.

With an increasing number of motorists using price comparison websites, there is a growing trend for motorists to simply opt for the deal which appears to be the cheapest. However, a number of price comparison websites will now highlight whether or not additional features such as breakdown cover and legal assistance are included in the packages. It is up to you whether or not you think it is worth paying a little bit more in order to derive that additional protection.