Premiums Are Usually Worked Out In Steps

Premium breakdown calculation
What these steps are and how much they affect the final premium are very insurer specific.

Car Insurance Premium Logic

Once you undertsand the process the results are more reasonable.

This site aims to explain how car insurance premiums are usually calculated in response to repeated questions on various internet fora such as
  • I added my mum as a driver and the premium went down.

  • Why is someone quoting £300 and someone else £1200?

  • Why is my renewal premium higher than my first year's premium?
Unlike a price comparison site, this site uses simulated quoters which means that as well as showing the final premium it can show how that premium was calculated.

The insurance industry is quite cautious and I know that some people question the reliability of the calculations on the basis of how can they say that I am high risk because of my occupation, age etc.

It is quite clear that on an individual level it is impossible to say that someone has a type of behaviour because they fall into one quite wide category.

Equally it is true to say that historically publicans as a group were more likely to drink and drive than many other occupations and that all insurance premiums are calculated on averages.

Of course whether it is fair or not won't help you if you want to try and argue with a price comparison site.

I have got my premium breakdown what does it all mean?

Most insurance companies operate schemes, schemes are targeted at a sector the market such as young drivers, safe drivers, classic cars or drivers who drive during quieter parts of the day. Most insurers will have multiple schemes in the market at the same time.

Generally insurers operate schemes so that they can calculate the likely costs of claims and budget accordingly and offer the lowest price to the type of customer that scheme is aimed at.

These schemes are why you sometimes see on the price comparison sites an insurance company offering more than one premium where one is competitive and the others are not.

As these schemes are all about averages different ways of calculating the cost of claims can result in very different premiums.

You could offer everyone the same premium regardless of the risk they represent, if you did this the safer drivers would be subsidising the more risky drivers.

You could offer a low starting premium in the calculation and then load it very heavily for the risky driver.

You could offer a high starting premium in the calculation and then load it very little for the risky driver.

All of these options and other will give very different premium for an individual whilst covering the cost of the claims.

Each of these steps is explained here.

Realistic But Not Real

Some cash on a clear background The data entry screens have limited options but all the important concepts are there.

As this site is for playing with does anyone really want to scroll through a list of all the variants of a 1.6/1.8/2.0 Ford Mondeo and end up with almost the same result?

Are The Quotes Accurate?

100% accuracy would require the use of confidential information, but for the purposes of playing they are pretty close.
The quotors used on this site are not real live products but they are realistic and undertake the steps that a real insurance scheme would typically make. But they use numbers that are similar to but not identical to schemes live in the market.

To make data entry easier options for certain risk factors such as vehicle and occupation are a tiny subset of a the live ABI lists but they have been chosen to represent a significant cross section of the insurance significant factors.

For example a Publican is a different risk to a Computer Programmer but a Computer Programmer is virtually the same risk as a Computer Operator or an Admin Manager.

Equally a Ford Fiesta 1.1 is virtually the same risk as VW Polo 1.0 or a Vauxhall Corsa 1.1.

Why Are Some Premiums So Silly?

A silly premium Many price comparison sites show premiums that are so uncompetative that you may wonder why they bother.

Basically there is a grey area where an insurer doesn't want the business but won't refuse it if you are daft enough to pay the totally uncompetaive premium.

Declines And Silly Premiums

Downloading is easy and we trust you to pay if you use it much, it's a lot less hassle all-round
As a scheme is targeted at a particular type of driver how should an insurer respond when a driver is a not suitable.

There are two options, one is to quote a premium that is uncompetitive often to the point of being apparently silly.

The other option to decline, to not offer a premium at all.

The exact point where to draw the line is often unclear, for example a safe driver scheme would probably decline someone with an IN10 (driving without insurance) conviction last year as this suggests a high risk.

But they may accept the risk and load the premium a lot if the conviction was 3 years ago and add a smaller load if the conviction was a longer time ago.

So someone with a No Insurance (IN10) and a Drink Driving (DR10) conviction may find that the loading for either of these convictions makes the premium high and for both of them apparently daft, nobody would pay that. Which is the point as far as that scheme is concerned.

Other Interesting Pages On Some Of My Sites.
Personal Business Intelligence
PerBI Screen shot Personal Business Intelligence PerBI (Personal Business Intelligence) is a data analysis or business intelligence tool designed for use by "normal people" not IT Departments and is intended for use alongside existing administration systems.

Although developed after experiences with insurance brokers, PerBI is relevant to any business that has up to 20,000,000 transactions that it wants to analyse.
Buy A Ghost
Picture of a cat with yellow star Buy A Ghost is a light hearted source of one page ghost stories aimed at pubs and restaurants as talking points.

Print them off and put them on the tables or walls and you have an instant talking point.

Aimed at regulars who have run out of things to say or new groups or couples as an ice-breaker.
Weight Loss Calculator
Screen shot of weight loss calculator Weight Loss Calculator Tries to simulate the body and report the effects of food and exercise in periods as short as 15 minutes.

This level of detail highlights the effects of a run, bike ride or chocolate bar.

For those who are new to exercise, weight fluctuation due to glycogen usage is made much clearer.
Please note that these links do not use any tracking cookies or similar technology.