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So why won't insurance companies cover your 10-year-old car?

Many insurers refuse to offer policies for older cars regardless of their roadworthiness.

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IRISH CONSUMERS ARE used to the acquisition of car insurance here being a costly enterprise, particularly for young or experienced drivers.

But there are other issues at play.

Many insurers flat out refuse to cover vehicles that are greater than 10 years old.

The roadworthiness of the vehicle is not an issue here (in many cases a company will offer a policy regardless of whether or not the car in question has a valid NCT cert, although that’s a separate topic) – to begin with, a car built in 2007 will often sport many of the modern conveniences you would expect from a newer machine.

The issue is solely one of age. And it means, again, that those operating on a lower budget may struggle to find anywhere to insure their vehicle, even if they can afford to do so.

But if a vehicle is perfectly roadworthy, why would an insurer refuse it cover?

Asking around

TheJournal.ie put the same question to seven separate insurers – Liberty, Axa, Aviva, 123.ie, AIG, Allianz, FBD, and two intermediaries/brokers, the AA and Chill – that being, what is the company’s policy on cars aged ten years or older, and if it won’t insure such a car, why not?

All told we got just four responses with three official statements of policy received in return.

It is probably no coincidence that all three who responded positively are willing to insure older cars.

Liberty’s Deirdre Ashe said that her company will cover private and small commercial vehicles up to 20 years of age, and vans up to 25 years old.

Aviva meanwhile said that since summer 2015 it had been refusing quotes for cars aged 14 years or older “because of our claims experience” with regard to such vehicles.

“We simply could not cover new business for these older cars or vehicles on a financially sustainable basis. Rather than pushing up rates across our broader customer base, we decided to cease quoting for new business in this segment,” a spokeswoman said.

However the company added two caveats – that existing Aviva customers could continue to insure an aging car, or insure an older vehicle should they buy one, and that in the next two months it is planning on extending cover to “75% of vehicles registered after 1999″. Which is positive news for drivers.

The AA said that it does “insure cars which are older than 10 years in accordance with our underwriters terms and conditions on a case by case basis”.

“As with any insurance policy we take a large number of risk factors into consideration… when deciding whether we can provide an insurance quote or not and do not make this decision on the basis of any single factor,” the company said in a statement.

We must operate within the terms of our underwriters and as a result cannot guarantee that we will be able to provide insurance in every case where the car is older than 10 years.

So there are options for those driving an older car. There just aren’t that many of them. And less choice for a consumer means less bargaining power and a poorer deal.

Taking a risk

But the key word in the AA’s statement is ‘risk’. Specifically a company’s risk appetite. The reason for declining a quote for an older vehicle tends to come down to specific risk factors – with many companies deciding that the driver of an older car is business they can do without.

“Insurers make decisions on insurance cover based on their underwriting criteria, their risk appetite and their claims history,” a spokesman for industry body Insurance Ireland told TheJournal.ie.

A well as the type of vehicle, its engine size and its age, other factors will include the type of driving licence the applicant holds and their driving experience, but the weighting applied to each factor is a matter for each company. Decisions on insurance cover are made in the context of the claims environment where our personal injury awards are dramatically out of kilter with those paid internationally.

Screenshot 2018-03-10 at 20.39.03 Chair of the Personal Injuries Commission Nicholas Kearns Source: Sasko Lazarov/Rollingnews.ie

Doubtless, the erratic nature of Irish personal injury payouts are a major factor in the industry’s reluctance to insure older cars – payouts for soft tissue injuries here are more than three times that seen in Britain, and account for about 80% of all payouts – again, way ahead of the international norm. The inference is clear – older cars equal more problematic claims. Unless that changes neither will the insurers’ stance.

But, as can be seen via the Aviva statement above, there may be light at the end of the tunnel, evidenced to an extent by the return of a smidgen of stability to the cost of premiums here in 2017 after an especially rocky two years previous (in 2015 alone more than a third of Irish drivers saw their insurance rise by up to 50% – a situation that descended into something of a blame game between insurers and the legal profession).

Work has been done to rectify the problem however, starting with the publication of a fresh Book of Quantum in 2016, the first in 12 years, which officially crystallised the level of claims being seen in Ireland.

Insurance Ireland states that the next 10 months represent “an opportunity” – both in terms of the reportage of the Personal Injuries Commission (PIC, chaired by former High Court President Nicholas Kearns), and with regard to the introduction of legislation to give the Personal Injuries Board more substantial powers to prevent claims from hitting the courts.

The PIC is seeking to both quantify soft tissue injuries such as whiplash which dominate Irish injury claims, and to benchmark the claims seen here internationally.

“At present with companies it comes down to how much of the older car risk they want,” an industry source says, who says the NCT is something considered “as a point in time assessment and it’s one factor in terms of how they price”.

Market share

“They want market share, and every company wants to be profitable. But if they won’t insure you then it’ll come down to market conditions – the direction where the claims and settlement costs are headed, and whether or not the level of risk is profitable,” they say.

File Photo There has been a slight drop in the cost of running a car - but it will still set you back over €10,000 a year Source: Eamonn Farrell/Rollingnews.ie

The same source adds that while the situation is “improving”, with one report from the PIC detailing the trends regarding soft tissue injuries already released (and instructing insurers to release their own data on such claims), and another on the benchmarking of claims and payouts pending, the situation remains “difficult”.

“Court awards are still going up,” they say simply. “And you still have difficulties with the injuries board”.

Legislation has been on the table regarding the powers of that board since last summer, although there is no clarity as to when it might be passed.

“2018 is definitely a big year. We had the report of the Cost of Insurance Working Group last year. This year is about how it’s implemented,” the source says.

The CSO says there’s been a 12% year-on-year drop in claims – and there’s been some stability since the Setanta decision (in January of this year, which ruled that the costs incurred by the failure of the Setanta Insurance group were to be settled by the State).
What happens with the Personal Injuries Commission and the new injuries board legislation is key. Until then all the industry can do is work off the claims trends that are already there.

Read: Quiz: How long is this Irish drive?

Read: How much money will the new Garda Commissioner be paid? It’s the week in numbers

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