Changes in Car Insurance Law: What You Need to Know to Stay Legal

Now that 2012 has come and gone, we hope you are aware there were significant changes to the car insurance laws beginning in 2011. The changes were put in place to reduce the number of uninsured drivers on the road, keep premiums at affordable prices, and protect the typical UK driver both financially and personally.

If you have never purchased car insurance before then these new changes will probably mean nothing to you. However, consumers who have purchased car insurance policies in the past might be caught off guard at renewal time. We will tell you everything you need to know to stay legal and to find the best policy possible.

Changes in Car Insurance Law

Significant Changes in the Law

The two most significant changes in car insurance law directly affect every driver in the UK. The first change now makes it illegal to own a car without insuring it unless you notify the DVLA that the vehicle is not currently on the road. Under such circumstances, you absolutely may not drive the car.

If you are caught without insurance or you fail to notify the DVLA of a vehicle that is off the road, you will face a minimum fine of £100. According to The Sun you also risk the potential of your motor being seized and an additional fine of £1,000 be imposed.

The second major change has to do with parents and their teenage children. It is now illegal to insure a child's car in your own name under any circumstances. Many parents have done this in the past to get around the high rates young drivers tend to pay. The practice is known as ‘fronting’ and may result in your insurance company refusing to pay a claim in the event of an accident.

Premium Increases over the Years

A combination of insurance fraud, higher repair costs, and other factors have all contributed to sharp increases in car insurance rates over the years. The price increases have, in turn, led to some common misconceptions about what type of policy an individual driver needs to purchase.

For example, young drivers tend to purchase third-party car insurance under the assumption that it is the cheapest. However, since young drivers are more likely to file a claim than their older counterparts are, their rates are also higher. An influx of young drivers purchasing third-party insurance has caused prices to go up significantly.

More importantly is the fact that insurance premiums go up every time a driver makes a claim. This is true regardless of the age or experience of the driver in question. It is also true even if you have a car insurance policy with a no claim discount (NCD).

NCDs are a great way to encourage drivers to be safe behind the wheel by offering a discount for every year no claims are made. After so many years, you can protect your discount with some companies. Nevertheless, your rates will still go up after a claim regardless of whether or not you protect your NCD.

Different Types of Car Insurance

In the UK, there are three basic types of car insurance policies. Each has their pros and cons depending on the driver, the car in question, and the type of cover one is looking for. In a 2011 article published by the London Evening Standard, the three types of policies were described as follows:

  • Third Party - A third-party policy covers a driver against financial loss should he injure another driver or cause property damage in an accident. It is essentially a liability policy providing the funds to pay for injuries and damages you cause. It does not pay to repair or replace your vehicle or personal property.
  • Third Party with Fire and Theft - This insurance also provides liability coverage but also adds cover for your car in the event of fire or theft. It still does not pay to repair or replace your car after an accident.
  • Comprehensive Car Insurance - Comprehensive cover offers third party liability, fire and theft, and cover for repair or replacement of your car after an accident. It pays regardless of who is at fault, so it is the most expensive option.

Additional Cover Options

Almost every car insurance company will try to sell customers additional cover options. Not only is this normal, but several of them also make pretty good sense. For example, Guaranteed Asset Protection (GAP) cover is a great idea if you finance your new car purchase through a bank or other lender.

If you should have an accident after which your insurance company writes off your vehicle, your GAP cover pays the balance of your finance. In some cases, you will even be paid an additional amount to make a down payment on a new car. Unless you can afford to replace your car out of pocket, you should seriously consider this additional cover.

Other types of additional cover include:

  • breakdown cover
  • uninsured driver cover
  • windscreen cover
  • stereo cover

Car Insurance Groups

In order to make calculating rates somewhat easier, the UK insurance industry developed a system of car insurance groups into which every make and model of vehicle fall. The old system was based on groups of 1 to 20 as rated by the Insurance Group Rating Panel, but they were expanded to 50 groups for 2011 in order to create bands that were not so narrow.

The group your car falls into has a significant impact on how much you pay for car insurance. Groupings are determined by rating a number of factors that help determine how much of a risk a particular car poses. Knowing what group a car falls into is helpful when you are purchasing a new vehicle. The grouping will give you a good idea of what insurance might cost, thus allowing you to budget more effectively.

Keep in mind that grouping is not the only factor determining your car insurance premiums. In fact, more important than grouping is your age, sex, and driver history. These three factors are much more accurate in determining the likelihood that you will have an accident resulting in a claim.

As an example, statistics show that young drivers between the ages of 17 and 24 are responsible for the greatest number of car accidents on the roads. As such, they also pay the highest insurance premiums among all drivers. Their age and lack of experience far outweighs the groupings their cars fall into.

Finding the Best Policy

The sheer number of companies offering car insurance in the UK makes finding the best policy a monumental task for the inexperienced consumer. Good places to start are the insurance comparison websites that are now so common across the web. These comparison sites allow you to fill out a single form in order to get multiple quotes from different providers.

With quotes in hand, the next step is for the driver to compare them side-by-side. This type of comparison is more than looking at the price of the premium; it involves finding out the types of cover offered, the annual financial limits of the policy, what is not covered, and any deductibles the consumer might be responsible for.

When you compare quotes you will probably find the best policy for you is somewhere between the one with the cheapest price and the one offering the most total cover. Keep in mind that cheaper is not always good and vice-versa. You need a policy that will provide you with enough financial protection without exceeding your budget.

Black Box Policies

If you are willing to allow your insurance company to monitor your driving practices in real time, one of the newest things in car insurance is known as the Telematic or "black box" policy. Telematic car insurance sets premiums, in part, according to how an individual driver performs behind the wheel.

The "black box" nickname comes from the fact that the insurance company gives the driver a small electronic device that uses GPS monitoring to keep track of speed, distance, and other factors. This device plugs into your car's USB port and reports the information back to the insurance company.

As long as the Telematic device provides your insurance company with good results your premiums will remain as low as possible. However, the opposite is also true. If it shows you are reckless, you can expect your rates to go up.

Conclusion

Regardless of company you purchase your car insurance from, the price you pay will be your own doing. It is important for you to know the law, do a proper cost comparison, and drive safely and legally at all times. Doing so will ensure your rates do not go any higher than they need to.

You have the option of going directly to car insurance providers and getting your own quotes. Here are some links to reputable companies you might consider:

  • Aviva -- Aviva is one of the most well-known names in UK financial services and insurance. Among all of their offerings is quality car insurance to cover any driver and any car. You won't find them on comparison sites either.
  • Admiral -- Admiral offers several different types of insurance coverage. Their car cover is available for single cars, multiple cars, young drivers, etc.
  • Churchill -- As one of the UK's first direct motor insurers, Churchill is considered an industry leader. In addition to car insurance, the company also sells home cover and other products.

If shopping for car insurance seems a bit overwhelming, we recommend you use insurance comparison websites. They make the job much easier. Here are links to some of the most well known comparison sites in the UK:

  • Compare The Market -- Get car insurance quotes and collect meerkat toys all in one place when you visit this site. Comparethemarket.com offers you multiple quotes with just one simple form.
  • Go Compare –  Here you can compare car insurance quotes from 120 different providers. You can even enter a contest to win free car insurance when you purchase online.
  • Money Super Market -- This site offers quotes in under 5 minutes for most drivers. Quotes are available from 125 different car insurance providers covering everything from standard to specialist policies.
  • Confused -- Confused.com works with 132 car insurance companies to provide you with cheap online quotes. When you purchase from them you earn 2,000 nectar points as a bonus.
  • Tesco Compare -- Offering quotes from some of the UK's most well-known companies like Admiral and AXA. When you buy online, you also get 12-months of Key Recovery service free.
  • U Switch -- uSwitch.com claims as many as 50% of all drivers using their site save £400 or more annually. Here you will get quotes from some of the best UK companies in minutes.
  • Money UK -- Offering comparisons for 338 different car insurance policies. Aviva, John Lewis, and Direct Line are just a few of the companies this site works with.
  • Totally Money -- TotallyMoney provides quotes from 80 different providers with just one form. Their Telematic partners can offer savings as high as £540 per year.
  • Money Saving Expert -- Everything you need to know about buying car insurance can be found here. The site offers information about the types of cover available, what you can expect to spend, and how to find the best policy for you.