Is your car insurance higher because of claim you didn’t make?
Everyone knows that you have to disclose an accident or motoring conviction when buying car insurance, and if you’ve made a claim, then your insurer is going to know about it anyway. But what about the situation where there has been an ‘incident’ that was not your fault and you haven’t made a claim? Well, not only are you required to tell your insurer, but they might bump up your premium as a consequence…
If you have been at fault in an accident, it is perhaps reasonable to assume that your premiums will go up, although this might depend on any protected no claim bonus arrangements. Some insurers will also penalise you for a no-fault claim- and while this might seem unfair, from the insurer’s point of view you are a higher risk. Admiral, for example, increase premiums after a single no-fault accident, such as someone driving into your parked car. They claim it’s just risk assessment:
“We use many years of claims data from millions of claims in order to accurately calculate the risk of a customer going on to make a claim,’ a spokesperson said.
“Our claims statistics show customers who have had a non-fault claim are more likely to make a claim in the future, compared with customers who have not had a non-fault claim. By having a non-fault claim our customers fall into a category that we see as a higher risk to insure.”
And while a no-fault accident for which you have made a claim might seem fair game, some insurers will also uprate your premium if you don’t even make a claim:
“We rate on the fact an incident has occurred, whether they have claimed or not,” finished Admiral, haughtily.
Insurers argue that someone who has had an accident is more likely to claim again for many reasons. It could reflect on the types of places that they are driving, or it could also say something about where the car is parked. Insurers might also think that it is a reflection of the motorist’s driving habits; perhaps they drive in ways that are more likely to result in an accident even if they didn’t directly cause it.
But if you don’t make a claim, how will your insurer know, right? Wrong. All insurers will state in their terms and conditions that customers must report incidents regardless of whether they make a claim.
The Association of British Insurers admits that this is partly so that insurers can adjust premiums accordingly, but is also to alert your insurer to the possibility that there could be a claim made against you at some point in the future, for example where an injury becomes apparent or symptoms alleged sometime after the original incident. Yeah, right.
All this information is stored on the Claims and Underwriting Exchange (CUE), a massive database containing 32 million claims records that is shared by all insurance companies. And it means that once one insurer knows something, they all do.
But what can you do about it? It sounds simple, but you need to shop around- as not all insurers treat this information in the same way. The financial ombudsman says that “some insurers do rate on notification only incidents where no claim has been made, but it usually won’t increase the premium as much as a non-fault claim, which in turn does not increase it as much as a fault claim would.”
Some examples of insurers that don’t increase premiums for no-fault claims include the Co-operative insurance and Direct Line, but there’s no guarantee this would make them the most competitive, nor that they wouldn’t increase premiums for some other, unconnected reason.
So, what if you do not report a non-fault incident? While this is a very tempting option, if you do not report an incident and your insurer later finds out, they may claim that your policy is invalid and refuse to pay out on future claims.
However, in this situation, it would be up to the insurance company to prove that it would not have covered you, would have charged you more or would have offered a lower level of cover had it known about the incident.
The financial ombudsman (to whom an insurance dispute like this might be referred if you and the insurer can’t agree) also said that “ the way insurers calculate their premiums is their own commercial decision, provided they treat everyone in the same situation in the same way, and if consumers are asked about incidents and losses then they should disclose them whether they’re recorded on the insurance central database or not.” So you have been warned.