Tech Trouble: How New Car Technology could be Pushing Up Your Insurance

By Lewis on 26th July 2019 - View Comments

Many of us have technology as part of our driving experience. Whether it’s a Sat Nav to (hopefully) send you in the right direction for that holiday or a parking sensor that makes sure you definitely do have enough space, these types of additions to cars are becoming the standard.

However, some of the nation’s top car insurers are reporting that this is having an unintended consequence for drivers, making their car insurance claims more expensive.

As Hastings chief executive Toby van der Meer told Financial Times, “the cost per accident – particularly repair costs – are driving inflation. “More expensive vehicles are safer than other cars, but more expensive to repair. It is not just repairing a piece of bent metal, it is fixing technology and sensors.”

These types of repairs are, naturally, more complex than your run-of-the-mill cosmetic upgrades – and that’s driven up both the price of parts and the cost of labour, which has been passed onto consumers.

And because of just how many of us around the world now have tech in our cars, it’s not a UK-only problem; Stephen Hester, the chief executive of insurer RSA, said it was “the same in pretty much every motor market.”

Another problem that’s unique to these newer, more technologically advanced cars is keyless entry car theft, also known as relay theft attacks. Criminals use the signal going between pair of relay boxes – one near a property, where the key is stored, and the other near the car itself – to trick the car into thinking it’s received a signal from its real key. This allows the car to be seamlessly unlocked and driven away, often in a matter of seconds.

The Association of British Insurers says that the industry paid out £376 million for car thefts in 2018; that’s almost 30% more than the previous year.

All this could see claims inflation rise – but the cost of cover more generally is less likely to do so. Normally, insurers would increase their prices to try and offset this rise, but in a market that’s more competitive than ever, many of the major insurers are trying to keep prices low to entice customers.

Despite this, the need for these major players to balance customer retention with their profit margin has meant that some of the ‘mid-market insurers, like Esure and the AA, have been able to thrive.

Of course, technology isn’t all bad. Last year, for example, Netbase revealed that younger motorists could cut their claim prices by up to 30% if they used a dash cam. Nonetheless, it’s still a confusing market for insurers and customers alike, and it’s set to get even more so. There’s currently an ongoing inquiry into pricing practices, and the Civil Liability Act is aiming to cut the number of whiplash claims.

In the meantime, insurers have a few methods of damage control. “We make sure we do repairs at the most economic cost,” says Toby van der Meer, “and the rest is about pricing effectively, increasing retention and remaining low cost.”

Have you seen your insurance premiums rise recently – and how much do you think this is due to new technology in cars, competition or something else entirely? Let us know in the comments!

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