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The Evolution of UK Car Insurance

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In the early days of the car nobody really saw a need for insurance. One reason for this was the early design of cars. Many early ones to hit the UK were just as slow and cumbersome as their U.S. counterparts. You had more of a chance of being involved in an accident with a horse drawn carriage than a 'horseless" one. Since then, car insurance in the UK has evolved into a major industry with policies covering just about everything. Here's a look at how it all started, where we are today and what car insurance might be like in the future.

UK Car Insurance: The Early Years

• Prior to World War I - Before the First World War, the number of people driving and the technology available did not amount to much of a need for car insurance.

• After World War I - By the time of the First World War, Henry Ford had already invented his assembly line in the U.S. and the concept was moving to the UK. Troops returning from combat were trained in driving vehicles, sparking a surge of interest in driving. However, car insurance was still not required at this point.

• Hire Purchase - Cars were still scare heading into the 1920s until the arrival of hire purchase in Britain. Hire purchase made cars affordable to a greater number of people over a relatively short span of time. By the end of the 1920s, cars were a common sight on the roads of Britain.

• Road accidents - Due to poor driving standards and lack of solid driving skills and road discipline, car accidents soon became just as common as cars on the roads of Britain. A driver who lost their car in an accident had no way to recover the cost of the car.

• No recourse - It quickly became apparent that the cost of buying a vehicle and then paying for any repairs incurred as a result of an accident was quickly becoming too much for most people. Even when an accident was not the fault of a driver, he had no recourse and was still stuck with the expense of repairs.

• Road Traffic Act - There was no compensation for innocent victims of traffic accidents. This resulted in the introduction and passage of the first Road Traffic Act in Great Britain in 1930.

• Required car insurance - The Road Traffic Act made it a requirement for all vehicle owners and drivers to have insurance to cover liability for injury or death while driving on a public road. Some early car insurance existed before the 1930, but was not a requirement and therefore not very popular.

• Composite insurers - By the 1950s, large composite insurers were handling most of the vehicle insurance in the UK. A composite insurer is an insurance company that provides several types of coverage, in addition to vehicle insurance.

• Little competition - Up through the late 1960s there was little competition in the UK in terms of vehicle insurance. Composite insurers formed a monopoly pooling together all statistics to create standard rates, terms and conditions. As a result, pricing and coverage was about the same for all large insurance companies.

• The tariff - These companies eventually formed an insurance tariff resulting in a divided market. Some insurers joined the tariff, while others refused. The tariff was eventually dissolved in 1968.

• Competition - Two main groups remained outside the tariff during the early years of its creation. The so-called "non-tariff" brokers offered cheaper rates and attractive discounts. The lower premiums meant that the "non-tariff" insurance companies were selective in whom they accepted, staying away from high-risk drivers. They also had stricter claims procedures.

• Insurance brokers - A boom in vehicle insurance took place in the UK in the 1960s with increased competition. Some of the "non-tariffs" relied heavily on brokers to sell their product. Brokers had an advantage in that they could work with different insurance companies. Brokers were able to offer customer reasonable costs spread out with easy payment schemes.

• Personal touch - Brokers relied on a "personal touch" in selling motor vehicle insurance. They would receive a commission from the insurance company for selling a policy. There was no pressure on the customer to purchase car insurance. A price would be quoted based on tables supplied to them by the insurance companies. If the customer was simply not interested, that was the end of it. No high pressure tactics were used. A typical broker would have about 50-60 insurance companies to quote from.

• Paperwork issues - In the early days of brokers there was a lot of paperwork involved. The insurance company could not get their cut of the deal unless all paperwork was correct. Some brokers would make "mistakes" knowing the paperwork would come back to delay giving the insurance company their compensation. Yet, this was still a time of tremendous growth for the car insurance industry. Expansion and growth seemed endless as more and more people had cars that needed to be insured.

• 1970s - The collapse the largest car insurance company in the UK in March of 1971 combined with a severe winter resulted in massive claims and several thousand people scrambling to replace their now cancelled policies.

• High Street Broker era - Surprisingly, the public did not blame the brokers. However, High Street Brokers were flooded with requests for car insurance. As a result of the influx of new policies starting at this time, March became the busiest period of the year for car insurance in the UK for many years. Many household names in insurance emerged during this period. High Street Brokers continued to thrive well into the 1980s.

• 1980s - The early 1980s saw the continued dominance of High Street Brokers. Once again, there was a seemingly endless growth of car insurance. Brokers remained as popular as ever. It appeared as if nothing could slow down the growth of brokers offering car insurance coverage, until the practical development of the computer.

• The computer age - The emergence of computer technology took away some of the power previously held by brokers. When computers started to become a part of the business world, several of the bigger names in insurance took advantage of this new technology. Insurance companies embracing this technology could provide faster service and quotes over those still manually generating quotes.

• More efficient car insurance - Brokers were now able to travel outside their traditional areas because they no longer had to have as much knowledge to generate quotes. Insurance companies were embracing the computer age because it meant there were no longer as many mistakes on forms and payments were consistently made on time.

• End of the age of High Street Brokers - Insurance companies were now able to demand better discounts than what was offered by the brokers on High Street. Soon other brokers and insurance companies became to dominate because they could be more competitive. The age of the dominance of High Street Brokers was officially over.

UK Car Insurance: Today

• The internet - The emergence of internet technology has ushered in a new era for UK car insurance. Today, those searching for insurance can quickly find quotes online. In addition, it is very easy to compare quotes and get an estimate of expected premiums.

• Quotes anywhere, anytime - The car insurance market is now very interactive. Brokers rarely have to come face to face with customers. Many transactions today are easily handled online. Customers can easily go online and easily compare prices to get the best quote with little effort.

• Better customer service - Today, a customer can quickly ask a question online and get an answer back in real time or a quick response to an email question. These days, the average customer is more informed than in the past or can quickly access to the information

Price comparison sites - Now those looking for car insurance can choose from multiple policies after just filling in a single proposal form.

UK Car Insurance: The Future

• Big changes over time - It's hard to believe that car insurance in the UK is less than a hundred years old. Yet, many changes have occurred since the prevalence of car insurance after the First World War.

• The internet and social media - The emergence of social media is already changing the way business operates. The impact of social media on the UK car insurance business is not yet know. It will likely mean quicker customer feedback and a need to respond to any negative comments immediately to avoid a bad reputation.

• More choices - New technology means customers now have more choices. Some customers still prefer the personal touch of a face-to-face meeting with a broker. Other customers want a quick way to get a good deal on car insurance without too much hassle. Nobody knows what the future holds, but there will always be a need for car insurance no matter how customers choose to acquire it.


PLEASE NOTE that the information on this site was correct to the best of our knowledge at the time the article was written or edited in January 2013. If you know of any changes or inaccuracies we would be grateful if you would contact us so that we can make any necessary alterations.

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