The way the UK car insurance system works differs to that of much of the rest of the world. In the UK, it is the person which is insured rather than the vehicle, whereas in many other countries it is the other way around. There has recently been talk of this potentially changing, with parliament having debated the idea.
Here are some of the advantages and disadvantages of the UK changing its car insurance system to one more similar to that of the US and Europe.
The UK is known to be fairly expensive when it comes to car insurance, with many drivers barely able to afford the significant prices (especially younger drivers). If the UK were to change its system, then prices would almost certainly be affected.
It could well be the case that more levels of cover are added, which would all differ in price, and may well lessen the costs for some drivers. It could also raise the prices for other drivers, though, and insurance companies would be unlikely to accept any overall reduction in profits.
Perhaps the greatest advantage to a change in the car insurance system would be the ability for people to share a car. If it is the vehicle rather than the person which is insured, then multiple people would be able to use the car without each of them having to take out individual policies.
This would also help people to split the cost of car insurance, potentially making it very cheap overall. So, families and friends could be the greatest beneficiaries of a change in the car insurance system.
Any changes to the well-entrenched UK car insurance system are likely to take a long time to implement, not least because of the potential opposition from car insurance companies. The government has already stated that it ‘has no plans to change the motor insurance system’, so changes are unlikely to come about any time soon anyway.
It is unlikely that any changes would mirror other systems exactly, so it is difficult to predict how the world of car insurance might look if the system were changed.
Not Everyone Would Benefit
The truth is that there would be winners and losers from any changes to the car insurance system in the UK. Some very safe drivers may see their premiums go up, whilst less experienced drivers may see their premiums go down. This could prove to be a more balanced, fairer system, but not everyone would be happy with it.
Since the insurance policy would focus more on the car then the person driving it, those with a car loan for pricier cars may end up being unable to afford their monthly repayments if the insurance were to rise significantly for them.
Whilst there are good arguments on both sides for changing the UK car insurance system, it seems as though the arguments for are not yet compelling enough to stimulate change. It will be worth monitoring any proposed changes in the future, however, as they could significantly affect prices for everyone.