UK Temporary Car Insurance

Ever wished you could insure a car for less than the usual 12 months, perhaps because you want to borrow one for a short while, or perhaps lend one to a friend or relative? There is now a short term motor insurance product on the market

UK Car Insurance Premiums and Claims

Vehicle insurance typically covers property risk and risk of liability. Auto insurance coverage typically entails protection for property, against liability and medical expense coverage. Property risk includes theft or vehicle damage. Liability risk includes legal claims resulting from an auto accident. Medical expenses covered include injury, rehabilitation and may cover wages lost and funeral costs.

Most countries, including the United Kingdom, do not require drivers to purchase all the types of available coverage, only some coverage. For vehicles used as loan collateral, the lender typically requires specific insurance coverage.

Specific types of risk that may result in claims are known as perils. Insurance policies will enumerate in detail which perils are covered under the policy and which are not covered.

Understanding Insurance Premiums

Insurers profit in two ways, through underwriting and by investing. Underwriting is the process that insurers use to select risks to insure and when determining the premiums to charge for covering those risks. Risk evaluation includes the probability that a loss will occur.

Rate setting takes into account the frequency and the severity of insured perils. Additionally, the expected average payout that results from these perils is factored into rate setting. Factors that increase the likelihood of risk typically are factored into an increase in the premium rate. The business model is to collect more funds from the premium and investment income than will be paid out in claims, and to offer an attractive premium to gain customers. Profit is what remains after the premium and investment income subtract loss and underwriting costs.

Insurance premiums are considered a monetary reserve above claim payouts, or "float". Insurance companies typically invest float and earn interest or other income until funds are paid out against claims. The Association of British Insurers (which includes 400 insurance companies comprising 94% of UK insurance services) has approximately 20% of its investments in the London Stock Exchange.

Understanding Insurance Claims

Claims and loss handling are the actual insurance products insured parties purchase with premiums. Claims may be filed by insured parties directly with the insurer or through brokers or agents. The insurer may require that the claim be filed on its own proprietary forms, or may accept claims on a standard industry form.

Insurance company claims adjusters supported by a staff that includes records managers and data entry clerks, are assigned to incoming claims based on severity. Adjusters have variable settlement authority based on their knowledge and experience. Each claim is investigated by the adjuster, often in cooperation with the insured. The adjuster will determine whether insurance will cover a claim, to what monetary extent, and authorize allowable payment.

In handling claims, insurers strive for a balance in satisfying customers, administrative costs, and overpayment of claims. Policyholders can hire their own public adjuster to help negotiate their best interests during settlement with their insurance company. Fraudulent insurance practices are a significant business risk that requires management. Insurance disputes between policyholders and insurance providers over legitimacy of claims and handling can lead to litigation.

 

Copyright Roy Mason 2010