Mira Butterworth examines the premium repercussions for drivers who have committed motoring offences as the proportion of non-standard risks grows
The latest figures suggest that drivers requiring non-standard car insurance will constitute half of all private motorists on Britain's roads within two years. Currently they make up 40% of the market but, according to new motor insurer First Alternative, this sector of the market is poorly served and crying out for better service.
It says that non-standard drivers are paying an extra £500 annually than their standard counterparts, and claims it can reduce this payment by an average of £140 through its new rating systems.
However, while the industry consensus is that non-standard drivers comprise a growing sector of the market, there is widespread debate about how to define one.
First Alternative defines non-standard in three ways. First, it includes cars rated higher than 12 by the Association of British Insurers. The ABI ratings give all cars an insurance grouping from one to 20, according to the risk they represent, with one being the lowest risk. Second, it includes drivers with a recent claims history or a driving conviction.
And, finally, it includes drivers with certain personal characteristics - such as younger drivers - and drivers with certain occupations - such as sportsmen.
Patrick Swords, underwriting director at Sabre Insurances, points out that it is crucial to identify how an insurer defines a non-standard driver as sometimes it will just be someone with a motor conviction while, in other cases, the term will refer to people of a certain age or those that own a certain type of vehicle. "There is a wide variance in how insurers define non-standard business," he says. "For example, some define it as something that cannot be readily quoted on the brokers' software systems."
First Alternative admits there is a "tiny minority" of drivers who are classified as an extreme risk, which it will not insure. These include repeat drink drivers and A-list celebrities. But, chief executive Colin Batabyal says: "The non-standard sector is a growing area of the market and insurers are going to have to adopt to cater for it or find themselves out of the market."
The increase in non-standard drivers can be attributed to a host of factors, including an increase in speed cameras, which has resulted in more car owners with speeding convictions, and cheaper finance, which has encouraged people to take out larger loans to buy bigger, more powerful and, therefore, more difficult to insure vehicles.
According to Mr Batabyal, when it comes to motoring convictions in particular, some premiums in the market have become more relaxed while, in other areas, they have become more severe. He explains: "Some insurers are clamping down on minor convictions - for example, they used to allow one conviction before imposing an increase, but now they often don't allow this."
However, he adds that offences such as drink driving are less severe in terms of their impact on premiums as the risk is lower that people are likely to re-offend.
Michael Lawrence, marketing manager at Highway Insurance, agrees, saying that drink driving is also on the decrease as the message is finally getting home that this practice is socially unacceptable.
But he adds that the message about being uninsured has not been so successful - and those with convictions are suitably penalised. "Being uninsured is very serious and we impose hefty terms as a result," he says.
Insurers express mixed views about whether the premium increases they impose following motoring offences are exacerbating the uninsured driving problem.
Mr Lawrence does not believe this is the case. "The terms placed on people who have been caught with no insurance depends on the individual circumstances," he says.
However, Duncan Bowker, spokesman for Co-operative Insurance Services, says there is no doubt that the imposition of premium penalties is "not helping" the uninsured driving issue.
But what is the typical period of rehabilitation for drivers following a claim including a motoring offence? That is to say, how long must they wait until the premium penalties are removed? For many insurers, it is a three to five year period.
CIS offers a reducing scale of premiums, where the policyholder automatically moves down the scale each year if they remain claim-free. For example, a policy that has a 25% loading applied at inception will have a loading of 15% the following year, if they remain claim free. If a claim occurs, loading remains at 25% the following year.
Brokers agree that what happens to premiums depends on how the insurer defines a non-standard driver. John Mace, marketing manager of Footman James, says: "Different insurers have different ways of treating different offenders and there is always an insurer that will take the business - but at a price. The circumstances will always reflect on the level of premium and possibly the excess."
Ian Crowder, a manager at AA Insurance agrees, adding that some insurers are cherry-picking those individuals that it insures, while others are more relaxed about how they acquire customers. "Some insurers say they will not provide a premium increase after the first conviction, while others will apply certain conditions, such as this will only be the case if there is no further conviction within 12 months."
He adds that ex-offenders have always been more difficult to secure terms for, but they are not increasingly so. And ABI spokesman Malcolm Tarling points out that premiums for non-standard drivers would always be much higher in order to reflect the risk.
The industry seems to be taking steps to offer non-standard drivers a better deal, but it is unlikely that they will ever get close to enjoying the benefits enjoyed by standard drivers.
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