Why insurance premiums can change upon renewal
Written by Benedict Harrison
When it’s time to renew your insurance, you may find that the price of your next policy is different from how much you paid for your last one. Your insurance premium is subject to change upon renewal, which means that the cost of your cover can increase, decrease or sometimes stay the same from one policy to the next.
At Zego, we know that changes to the cost of your cover can be confusing and you may be left wondering why the price of your new policy is different from your last.
We want to help all of our customers understand why the cost of insurance premiums can change over time. Here, we’ll look at the different factors that can affect the price of your policy renewal, so you’ll have a better idea of what can cause a change in your premium.
A change to your details
When your premium is calculated, information about you and your vehicle is taken into account as part of the underwriting process. If any of your details change, such as your address or the vehicle you want to insure, this is likely to affect the price of your cover.
Your new price may be more expensive, cheaper or the same after your details change. In any case, it’s always important to make sure you have provided insurers with the most up-to-date information. If your details are not correct, your insurance cover will not be valid.
Claims information and driving history
If you are involved in an incident where you are found at fault, or if you receive a driving conviction and points on your licence, you can expect to see an increase in the cost of your cover upon renewal.
This is because insurers take your driving history into account when they work out how likely it is that you’ll be involved in another incident. For instance, if you have a number of claims against your name, your price is likely to be higher than someone who does not have any claims.
In some cases, you may even find that you are no longer eligible for insurance with your current company, which means that you’ll have to shop around for your cover.
No Claims Discount
If there are no claims made on your annual policy or 12 consecutive 30-day policies with Zego, you will gain a year’s No Claims Discount. This can help bring down the cost of your cover and you may see a reduction in your premium at the point of renewal.
You may also be able to lessen the impact a claim has on the price of your cover by protecting your No Claims Discount. Zego offers up to 5 years NCD protection to private hire drivers as one of our additional cover options.
Claims cost inflation
Your insurance premium is calculated according to your ‘insurance risk’, which is a statistical prediction of how likely it is that you will be involved in an incident and what it will cost. These statistics are modelled from the claims data of many drivers who have a similar profile to you. As a result, this means your insurance cost is affected by both the number of claims you are modelled to be involved in, and also more generally, how much insurers see in trends of the costs of those claims.
Additionally, over time, the costs of these claims change. This is called claims cost inflation. Claims cost inflation is caused by a number of factors outside of your control, including general inflation in the economy, changes to the value of the pound and, in particular, increases to the amounts awarded by courts for bodily injury claims. Bodily injury claim payouts are made by your insurer when an insured driver causes an injury or death to someone else - it can be a pedestrian, an occupant of another vehicle, or passengers in your vehicle.
At Zego, we understand why this can be frustrating for drivers. That’s why we’re always working hard to find new and innovative ways to price insurance products fairly. We believe that everyone should have access to the cover they need at a price that suits them.
If you have any questions about the price of your renewal, please get in touch with our team. We’re available 7 days a week and we’re always happy to help.