Change in address leads to increased car insurance premium

We recently got a mail from a reader by the name of Geraldine Conaty which started with the three words: “Can you help?” Geraldine had just moved from Dublin to Longford but that wasn’t the problem.

“My car is insured with the AA,” she wrote. “I rang them to change the address on my policy and was told there would be a charge of €81. I asked why as my car is parked in my drive in my estate exactly the same as it was in Dublin. I was told the charge was ‘computer generated’.”

Geraldine was unsurprisingly unhappy with this answer and she persisted and again asked what exactly the charge was for as there was absolutely no change to the policy except moving county.

“Again I was told it was ‘computer generated’ and after putting me on hold to speak to one of her colleagues, the woman I was speaking to told me it could be that there is a higher rate of theft in Longford or a higher rate of accident claims.”

If your existing insurer wants to make it harder than it should be for you to switch from them to another provider, they can do that handily enough

Geraldine was astounded by what she was hearing and deeply sceptical that this could be the case. She refused to buy the suggestion that Longford was a riskier prospect than Dublin.

She could not, however, refuse to buy the car insurance. “After about 40 minutes of trying to get a concrete and logical answer [which I did not get], I paid the charge purely out of fear that something would happen and there would be an issue about the incorrect address on my policy,” she continued.

She asked us if we could have better luck in finding out why she had to pay about 20 per cent more for her car insurance simply because she now lives in Longford and not Dublin. We did our best.

But we started out with a heavy heart as we know that when it comes to car insurance – and this is not specific to the AA – the companies have us all over a barrel.

Unlike many other financial products that you might consider buying, car insurance is a legal requirement and one we can’t just get rid of unless we also get rid of our cars. And if your existing insurer wants to make it harder than it should be for you to switch from them to another provider, they can do that handily enough and there is very little by way of comeback. That is not to say the AA would do that but merely to highlight how difficult it can be when someone is in this position.

We contacted Conor Faughnan of the AA to see how the company could justify a premium increase simply because someone was moving from the capital city to the heart of rural Ireland.

He first pointed out that the AA doesn’t get to control premium prices because it is a re-seller of insurance. “We’re not underwriters. We have a panel of insurers that we have done overall deals with but we don’t get to set the rates,” he said.

He made the comparison between a motorist buying one insurance policy and the AA which buys about 10,000 a month for its customers. That, obviously, gives them a lot of buying power and the chance to squeeze insurers for good overall deals “but we can’t change individual ratings or risk factors”.

We are still being ripped off by car insurance companies that are doing it because they can get away with it

So why are insurers’ prices so apparently random? “It is a bit of a black art sometimes even trying to figure it out. For each risk an insurer will weigh as many as 50 different factors: age, location, occupation, car type, etc. Everything except gender [which has been illegal since 2012],” he says.

Geraldine can blame the whole palaver on algorithms. “All of the risks go into the hopper and it will also include the overall balance of the book of policies the insurer already has. Like bookies, they are looking to equalise risk across thousands of polices, not individually. If an insurer is statistically over-represented or under-represented in any category, that can result in the software adjusting the price offered,” Faughnan continued.

He said that because of the complexities of the algorithms, you will get “anomalies and wrinkles” on occasion. “Sometimes the software spits out a price that is anomalously good, so by all means take it. Other times it produces a figure that appears on the face of it to be too high so shop around,” he added.

He accepted that it was a source of frustration for consumers “because the prices offered appear arbitrary and anything but transparent. Overall that is a fair comment.”

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