The Car Insurance Companies Perspective

Car insurance companies are in business to make a profit. Through the insurance mechanism, they provide a central repository where people put their money, and they then sort out situations resulting from accidents without drivers having to worry too much about the processing. Well, that's the theory anyway. And, in fairness, insurance companies do resolve most cases without causing too much stress to their insured drivers. Nevertheless, all insurance companies want to reduce their exposure to risk. They cover higher risks with higher premiums so that with lower risks, such as safe drivers who can offer proof of this through a No Claim Discount (NCD) certificate, they can afford to charge lower premiums. However, if a lower risk driver becomes a higher risk, the insurance company would not simply absorb the damage but would shift it subsequently to the driver in the form of a higher premium.

It is really all a game of risk and reward. If the driver to be insured represents a risk to the company in terms of possible payouts. the company willtry to cover itself, either by maximising the premium it charges to the customer or (quite commonly) by attempting to invalidate the insurance. This can happen ifany piece of information the driver gave in order to obtain the policy is found to be 'misinformation' or misleading information. or even if the driver has failed to inform the insurance company about any changes that have occurred since the policy was agreed. You should also be alert to the fact (touched on later in the book) that insurance companies have their own definitions and classifications of "fault". For example, you might be surprised to know that if someone vandalises your car or somehow damages it and runs away it may still be judged to be your fauIt!!!
Since insurance companies want to reduce risk, they consider all young drivers to be not only inexperienced but also prone to carelessness or even recklessness. All young drivers. therefore. without exception. are classified automatically in the high risk category. Female drivers. however. are usually considered less of a risk than male drivers of the same age and married people less of a risk than single people. Please note that, in general people, with partners but not married are usually considered by insurance companies to be single. though there are exceptions and some companies may accept cohabiting couples as eligible for inclusion in the lower risk category. More on that in the 'insurance factors' section.

Your claims statistics and history primarily determine your insurance premium. Ifyou represent a greater risk of loss, your premium will be higher. When you approach an insurance company for a quotation, the insurer decides on the acceptability of the risk and then, depending on the risk involved, calculates the premium to be charged.
There are three salient factors that impact on the insurer's assessment of risk:

the driver
the car
the risk address

The assessment of risk, its acceptability or otherwise, and the decision made on the premium to be charged constitute 'underwriting'. Underwriting is a technical term which an insurer uses when they take on the risk of accident or other damages and charge you premiums for bearing this risk. The insurers want to make sure they charge enough in
premiums from a large enough number of people to enable them to payout to the few who make the claims.