Modern vehicles are becoming increasingly sophisticated with numerous technologies developed to help increase safety, in turn reducing both the severity and frequency of incidents. This should be good news for the insurance industry; but will technology drive motor premiums higher?
The cost of claims not relating to bodily injury or theft rose 8% in 2018, indicating that the benefits these technologies will bring are still yet to surface.
Features such as anti-collision alerts, automatic emergency braking and lane departure warning systems will clearly help to reduce the number of claims faced by motor insurers, yet this technology is still relatively scarce.
Only 9% of UK cars possess anti-collision alerts or automatic e-braking and only 7% possess lane departure warning systems according to GlobalData’s 2018 UK General Insurance Consumer Survey.
Despite technology having clear benefits their scarcity is likely to be contributing to the increasing cost of claims and motor premiums. When such vehicles are involved in incidents the cost of repairs is considerably higher in comparison to a vehicle which has none of these features.
The replacement parts are more expensive and in some cases specialist garages are required in order to repair vehicles, again increasing the cost. There will of course come a point when the threshold is crossed and such technologies are helping to reduce the number and cost of claims, in turn potentially reducing premiums for policyholders.
In the meantime, premiums could be forced higher by the recent announcement that the UK is set to adopt vehicle speed limiters, with the technology becoming mandatory for all new vehicles sold from 2022. Although there is still a long period until this comes into force, it will likely have the same impact on motor premiums in the short run, with these vehicles having higher repair costs and driving up premiums.
The recent announcement that LV= has launched a specialist motor insurance policy for electric vehicles is perhaps another example of how the most advanced vehicles on UK roads have needs which are more complex than that of your average vehicle. The policy provides access to a network of specialist electric car repairers.
With electric vehicles being some of the most technologically advanced it is expected that the technologies previously discussed will be present in these vehicles, which when combined with the complexity of repairing electric vehicles will only drive repair costs higher.
Yet despite the rising cost of vehicle repairs increasing motor premiums in past years, policyholders may get some respite thanks to the Civil Liability Bill, which already appears to have some benefit, as premiums fell in 2018 by 1%. The Civil Liability Bill aims to reduce the cost of claims relating to bodily injury, in particular whiplash injuries which have been a key driver of increasing premiums in previous years.
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