American drivers like to complain about high auto insurance rates – and in high-priced states like Louisiana, ils ont la raison as they might say in the Pelican State. However, for the most part, Americans have had it pretty good; getting direct auto insurance, having the proper safety equipment, choosing safer vehicles and above all, maintaining a safe driving record has meant that insurance rates in the U.S. overall have increased only slightly, remained level and in some cases even decreased.
This is not the case for their counterparts across the pond in the U.K. In a nation where owning and operating a motorcar is already prohibitively expensive (for example, petrol – what the British call “gasoline” – is the equivalent of over $6 a gallon in that country), drivers have been hit with insurance increases of over 12% just since the beginning of April.
U.S. and U.K. Compared
Britain’s Automobile Association Ltd. (counterpart of the AAA) reports some types of motor car insurance, such as fire and theft coverage, have risen by nearly 16%. Today, the average British driver pays the equivalent of over $1,500 USD per year in order to protect their vehicles, and in some cases, nearly $1,900 annually. That’s still cheaper than 21 American states (in Louisiana, a driver’s auto insurance cost can be over $2,500 a year), but if the current trends continue, it’s going to cost British drivers a whole lot more to get car insurance.
Also, keep in mind that many of the other costs of auto ownership in the U.S. – such as fuel, maintenance and vehicle and road use taxes – are a fraction of what they are in the U.K.
Why?
According to a report published in Bloomberg Businessweek, the increases – which are the most dramatic in history – are due to several factors, not the least of which is the rising cost of handling and paying out claims. Two of the U.K.’s largest insurers, Aviva Pic and Direct Line (a subsidiary of the Royal Bank of Scotland) claim that increased litigation has driven up the costs of paying out claims to the point that they are losing money. One insurance industry spokesman says that “unscrupulous accident injury lawyers” (what we in the U.S. might call “ambulance chasers”) are convincing people to file claims for even minor injuries in order to make a few fast quid.
Another factor is lower investment returns that have further cut into insurer’s profit margins in that country.
The Worst is Yet To Come
As British insurers continue to lose money – and as a dysfunctional economic system, put into place by former PM Margaret Thatcher, drives working Britons to look to their civil courts as a source of revenue – chance are that full coverage auto insurance in the U.K. could rise by as much as 50% by the end of 2012.
Meanwhile, on our side of the pond, auto insurance rates in Ohio (the third least expensive state to insure a vehicle after Vermont and Maine) rose a very modest 2.8% since last year – and in New Jersey (currently #22), increased competition has given some drivers the opportunity to cut their premiums by 20% or more.
Americans don’t have it so bad after all…
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