Fair Car Insurance

Monday 22nd November, 2010
Back in 2002, as an MX-5 owners, I dreamed up a crazy idea for calculating car insurance. . It's based on old insurance grouping, but I figured it was worth re-publishing, so here it is:

I've devised a virtual insurance firm with fair policies based on published criteria, so simple you could possibly calculate your own premium. The main features are as follows -

All drivers will pay the same 3rd party liability premium - After all, it only covers the other car/person, it doesn't matter what you're driving. Potential 3rd party liability is the same.

Age will not be taken into account, simply the level of no claims discount. Young people are reckless, middle age people drink and drive, older people lose concentration and ability.

Insurance groups will be used to assess vehicle performance, theft, attraction, safety and security. By modifying the car from standard spec, you car may change group - e.g. Adding an immobiliser will lower your insurance group.

No claims discount will be completely re-devised and calculated using the above insurance grouping based on the following formula:

The flat premium will be charged at £5 per £1000 value of vehicle multiplied by it's insurance group.

e.g. A £10,000 Gp. 13 MX-5 will cost 50x13=£650.
The flat rate 3rd party premium will then be added (however much this needs to be, I'm not an

At the end of each year, the numeric value of the insurance group will be added to your no claims discount. e.g.  Your total level of discount will be the percentage your premium will be reduced by up to a maximum of, say, 70%.

So, after one year of the MX-5 above, you will have earned 13% discount and effectively paying £565.50. After year 2, you earn a 26% discount and premium falls to £481.

This factors in the quality and experience of the driver quite heavily. Driving a low group car for a few years will not give you a significant
discount. It's possible somebody with a "better" car will pay less if they've proven to be a better driver.

There will be a maximum payable on each car, related to it's value and insurance group. Payouts will never exceed the insured value. As a car gets older and loses value, it's premium will reduce along with your level of discount increasing. High performance drivers will be rewarded if they don't claim.

Any claim will reduce your level of discount by that year's insurance group. Discount can be negative and increase premiums.

So, from the example above, if you had a claim during year 1, your insurance would increase from £650 to 734.50. Another claim and you're up to £819.

A policy can cover multiple cars, you can only drive one at a time after all, but you must insure the highest cost vehicle. At the end of the year,
the average insurance group will be added to your discount eg. a group 7 and a group 13 will add 10% to your discount after the year is up. This would be a cheaper method than insuring two cars separately.

Obviously, over time, the £5 per £1000 fee would be adjusted up/down accordingly for all policies based on the insurer's needs to meet claims but everybody would pay the same, formula linked, premium. You end up with a sliding scale with those who claim a lot paying most at one end and those that never claim paying the least at the other end.

What do you guys think? Sounds fair to me.....

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