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Car Insurance Discounts – Fact or Fiction?

It seems like a very straightforward concept. Someone buys a new car and purchases an alarm system to protect their brand new vehicle. Their investment enhances the vehicle’s security, which also benefits the car’s insurer as it less likely to get stolen, resulting in lower car insurance, right? As I found out, in most instances, this is not the case.


To find out if UK motor insurers were providing discounts if car owners fitted aftermarket security products to their vehicles such as alarms, immobilisers, or GPS tracking devices at their own cost, I started by checking a largest comparison website, for quotes on a Vauxhall Corsa and BMW 525. During the application, the site provides hope by stating, “Did you know, a Thatcham approved alarm fitted could reduce your premium by up to 10%?”. Thatcham being the industry body responsible for testing and rating security features on new cars and products. We obtained quotes for both cars selecting the different security options and the Corsa’s quote actually increased by over 2% when a Thatcham Category 2 and Tracker option were selected, while the BMW’s cheapest quotes remained unchanged. This was not a good start.


I continued investigating by asking the country’s top car insurance companies and brokers, who between them represent over 50 of the most popular motor insurance brands in the UK, the following:


Do you offer discounts for car security products? If so, which manufacturer and products are these? What corresponding discounts can drivers receive? Are there any limitations or conditions surrounding these discounts?


Overwhelmingly, the answer was ‘No’ to our first question, which rendered the remaining ones redundant. Furthermore, many insurers stated that not only do they not offer discounts for car security products, if the car isn’t already fitted with certain ones, a potential customer can’t even obtain a quote.


One underwriter of a leading insurer, who asked not to be named, said they, “do not offer a discount if you have a security device fitted. However, in order to be eligible for a fully comprehensive policy depending on where the customer lives, where their car is parked and type of vehicle, a level of security would be required.”


I was able to find a handful of insurers who confirmed they offered product related discounts, however, they wouldn’t disclose any details stating the reductions could be removed at anytime. As another underwriter, who chose not to be named, explained, “we currently offer some discounts for a few security products that are in addition to the standard security on the vehicle. However, we do not wish to promote these discounts at the current time as they are shortly due to be reviewed with a view to reducing or removing them. I am unable to confirm what discounts we offer, on what products or whether we have any restrictions.”


Norwich Union was the only insurer who answered all our questions stating they offered discounts on aftermarket immobilisers of 2-5%, and 5% for tracking systems. If a Tracker is fitted, the subscription must be maintained with the provider and all devices must be fitted by a VSIB approved installer. Unfortunately, Norwich Union’s response was the exception, indicating a disappointingly low level of clarity around this issue with no apparent industry standard.


This is surprising, as car crime remains a major issue in the UK, as there were over 1.3M1 vehicle thefts and break-ins last year , with the latter actually increasing by 1% year on year. Furthermore, the financial impact of having a car stolen is significant as it costs the average theft victim over £3,000. This has resulted in UK car owners spending approximately £315M2 annually on aftermarket security products.


The latest British Crime Survey from the Home Office reports that these products are effective as a car can be up to 70% less likely to be stolen if fitted with one. Also, many products are approved by Thatcham, which is jointly owned by the car manufacturers and insurance industry, meaning insurers have effectively approved the products themselves.


A few insurers referred me to the ABI (Association of British Insurers) and said I should check this issue with them. Derek Fawell, ABI Policy Advisor for motor insurance, said that “the ABI is only involved in providing the group insurance rating on new vehicles, which takes into consideration the safety and security of the car as it is delivered from the factory, however, each individual insurer has the power to offer after market discounts as they deem necessary.”


So why aren’t insurers doing this? A major reason is that the UK motor insurance industry is a hugely competitive market. The ABI reports that it accounts for almost a third of all general insurance in the UK where £10.3 billion in net premiums were written in 2006. In addition, it isn’t the most profitable line of insurance, as more than one in six private car drivers make a claim each year, and this equates to £18.7 million paid out in claims every day! This leaves insurers in a cutthroat business needing to maintain their revenue and margins targets while retaining or growing market share, which is a very tricky matter.


Nonetheless, offering discounts for fitting car security products would be a way to differentiate an insurer’s offer in a highly saturated industry and attract more customers, help to subsidise some of the product’s cost, put more secure vehicles on the road and make the lives of thieves that much more difficult. Furthermore, in the long run, it could increase the insurer’s profitability through less claims and write-offs, while more of the cars they insured would have better protection.


I believe car owners should receive discounts on their insurance if they fit additional security products to their vehicle at their own cost, as their investment ultimately benefits the insurer. In the case where reduced premiums are offered, there should be greater transparency on the specific products and the amount of the resulting discount. This would make it easier for car owner’s to make an informed decision when looking to protect their vehicles or purchase car insurance.


So the next time you’re looking for car insurance or a security product, ask your insurer if they offer discounts for fitting them, and if so, which product and the amount of the resulting discount. It’s a straightforward concept that is currently mostly fiction and needs to become fact.


1 Home Office, British Crime Survey 2006/07, in England and Wales


2 Vehicle Security Market Report 2007, Key Note Publications Ltd, Feb 2007


Results


1 . Do you offer discounts for car security products?


Yes = 8%


No = 92%


2. If so, which manufacturer and products are these?


Thatcham approved engine immobilisers and/or alarms Thatcham CatQ and Cat5 tracking devices Varies by car manufacturer Unfortunately these are system generated and not shown as part of the customer’s display so we are unable to use these as marketable details


3. What corresponding discounts can drivers receive?


2-5% for immobilisers 5% for tracking systems


4. Are there any limitations or conditions surrounding these discounts?


If a Tracker has been fitted then the subscription must be maintained with the provider Aftermarket devices must have been fitted by VSIB approved installer
* report included 62 motor insurers (found through Moneysupermarket.com quotes & discussions with insurers)


* 5 offered discounts for aftermarket car security products


* 57 insurers didn’t offer discounts


* ABI estimates the total UK car insurance market to be 80 insurers including Lloyd’s of London syndicates (each insurer could have multiple brands)



Sample Responses


These were some of the responses we received to our queries listed above:


“Our standard Private Car product doesn’t offer discounts for additional security. We have specific security terms for each vehicle, and if the client doesn’t have sufficient, we don’t quote. We don’t mind about the specific system, so long as they are Thatcham approved devices.”


“Currently offer some discounts for a few security products that are in addition to the standard security on the vehicle. However we do not wish to promote these discounts at the current time as they are shortly due to be reviewed with a view to reducing or removing them. I am unable to confirm what discounts we offer, on what products or whether we have any restrictions.”


“Offer discounts if security devices are fitted but they have taken the decision not to advertise that fact as they may be removed at some stage.”


“Unfortunately we do not publish discounts regarding car security products.”


“We don’t have ‘discounts’ for security features as such. Security features impact the premium in two ways:


We have underwriting rules which demand that certain security features are present or else we’ll decline or load the premium We use the ABI defined groupings of vehicles to car groups to rate. In allocating vehicles to rating groups the ABI take into account factory built security features.”


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