Motorists in the UK have been warned that they may be paying higher premiums for their car insurance if they smoke.

Non-smokers sometimes benefit from reduced premiums because certain insurers view smokers as a higher risk group. These providers believe that drivers who smoke could be distracted on the road when they light up and are therefore more prone to accidents.

The Local Authority Road Safety Officers’ Association (LARSOA) recently urged legislators to ban smoking behind the wheel, stating that it is a distraction to motorists, much like mobile phones are. The LARSOA says that “trying to light cigarettes and the dangerous practice of throwing them out of an open window in the path of a car, bicycle or motorbike is far too distracting and could easily lead to accidents”.

In response to the call from LARSOA, Aron Thompson, head of car insurance at independent online price comparison and switching service uSwitch.com, told drivers that smoking could have an increasing noticeable effect on car insurance premiums after July 1st.

“With the new smoking laws coming into effect on July 1st, which will ban smoking in public places, it is quite possible that more people will smoke in their vehicles to get around the ban,” he explained, before warning that drivers could already be paying higher insurance premiums because they smoke.

“uSwitch.com is currently one of the few price comparison websites that asks drivers if they smoke as several insurance providers consider smoking to be a rating factor when it comes to pricing a motor insurance policy. Once the smoking ban is implemented, it will be interesting to see if more providers jump on the ‘higher premiums for smokers’ band wagon,” he said.

Mr Thompson also suggested that a ban on smoking could be the first of many further such actions if it is passed: “The introduction of a fine and points on your licence for using mobile phones whilst driving recently came into effect as it is difficult to argue that this isn’t a dangerous distraction – does the same apply to smoking? If so, should we also ban CD players in cars, hands-free mobile calls, satellite navigation systems – the list goes on.”

uSwitch.com is advising smokers to keep a close eye on their premiums, and urges those that see an increase in the cost of their insurance renewal after July 1st to find out precisely why.

Swinton, the largest high street insurance broker in the UK, has announced that it will approach drivers with six points or more on their license as “standard” candidates for motor insurance cover.

It is estimated that more than six million drivers have points on their license, and this revelation has prompted the insurance broker to re-evaluate the service that it offers to a growing proportion of British motorists.

In fact, Swinton believes that it is becoming increasingly rare to find motorists with a clean record, with cameras catching over two million speeders each year and recently implemented laws punishing people using a mobile phone whilst driving with an automatic three points.

During 2006, Swinton reported a 12 per cent increase in the number of drivers with blemished licenses applying for cover, moving to set up a dedicated unit to deal with rising demand in response.

A survey conducted by YouGov last year estimated that 16 per cent of all drivers on the road have points on their license, while some analysts believe that there could be as many as 10 million ‘pointed’ drivers. It is becoming expensive for car insurance providers to ignore this increasingly noticeable minority group.

“It’s the law that’s changed – not the public,” commented Patrick Smith, chief executive of Swinton. “People are no worse at driving now than they were ten years ago – in fact if anything, they’re safer now. But the person who has six points today is the same person who would have had three points five years ago and a clean license ten years ago.”

“It is important to mention that Swinton is not against speed cameras and we don’t condone reckless driving,” he quickly noted.

“We are just recognising that there are a large amount of people being prosecuted for traffic offences that wouldn’t have been ten years ago – and it’s our job to respond to this shift and accept that points alone can no longer be used as a yardstick for driver evaluation.”

Negative response

However, the new direction that Swinton is taking towards drivers with points on their license has not impressed everyone in the industry.

Responding to Swinton’s announcement, Debra Williams, managing director of UK insurance search-engine confused.com suggested that by downgrading its risk-rating for people with speeding convictions, it was attempting to ensure that its panel of insurers “play catch-up” with the rest of the industry.

“This is merely an attempt by Swinton to expand its book by cornering the market for drivers with speeding points,” she claimed.

An analysis conducted by confused.com indicated that Swinton was still not the cheapest provider for motorists with points on their license, even for those with as many as nine.

“Regardless of the cost of insurance, we urge drivers not to become complacent or view this as an opportunity to flout driving laws,” continued Ms Williams. “The more points you have, the fewer insurers are willing to provide cover – motorists with more than six points halve their choice of providers.

“Our advice remains, look beyond the marketing hype and always shop around for the best deal based on your individual circumstances – insurers typically review their prices on a daily basis.”

Motorists who make fraudulent claims on their car insurance are causing providers to push their premiums up by an average of £40 a year, according to new intelligence from the Association of British Insurers (ABI).

One in ten adults (five million people) admitted to having cheated on a general insurance policy including car insurance, on a survey conducted by YouGov on behalf of the ABI.

The ABI estimates that fraud is costing the insurance industry over £4 million every day, but that honest customers are being forced to pick up the £1.6 billion annual tab through higher premiums.

“Honest customers should not have to pay for the cheats,” said Nick Starling, director of general insurance and health at ABI.

Car insurance companies employ a number of tactics such as accident inspectors and combination questions to investigate potentially fraudulent claims. The Aviva Group, which is made up of the RAC and Norwich Union among other insurers, goes as far as carrying out voice stress analysis to identify whether customers are telling the truth.

The ABI’s findings indicate however that current methods are proving quite ineffective against insurance fraud and that more must be done if fraudsters are to be dissuaded.

“Insurers are committed to reducing the fraud problem,” Mr Starling said.”We are devoting greater resources to weeding out the cheats and working together to detect and combat fraud.”

He explained how the Insurance Fraud Bureau (IFB), which was established in July last year to tackle organised insurance frauds, had already had a significant impact on the levels of organised fraud.

“These figures highlight that greater deterrents, such as criminal prosecutions, are needed to discourage fraud. This is why we are calling for police forces to be given more resources so that fraud can be treated with the seriousness it deserves,” he concluded.

Aron Thompson, head of insurance at independent price comparison service uSwitch.com, responded to the ABI’s findings: “Fraud is a huge issue within the car insurance industry and undoubtedly it does increase the cost of insurance premiums for honest individuals who have never made a fraudulent claim.”

He went on to say that it was “extremely alarming” how many customers were cheating on their insurance policies by making fraudulent claims.

Opportunity knocks

Mr Thompson explained that there are, generally speaking, two types of fraudster. The “well planned” fraudster takes out an insurance policy with the intention of ripping it off. However, the “if I can get away with it” fraudster could be an honest member of the community who exaggerates a claim but wouldn’t normally consider committing a crime.

Such opportunistic fraudsters might make inflate the value of a claim following a genuine accident, or include items in a theft claim that were not in the car.

The ABI survey revealed that almost half of the fraudulent claims were opportunistic in nature and were carried out by individual customers. It is estimated that opportunistic fraud currently costs over £800 million a year.

“If a consumer is convicted of fraud it will become very difficult to get car insurance in the future so making a fast buck could result in a lifetime of excessive insurance costs,” warned Mr Thompson.

A new line of insurance products tailored specifically towards the over 50s market has been released by Help the Aged, the UK’s leading charity for older people, in association with mutual insurer Liverpool Victoria.

The new products, branded ‘intune’, will allow those in their twilight years to enjoy the same car, home and travel insurance benefits as the rest of the population, instead of facing the higher premiums typically levelled at older customers.

There are over 20 million people aged over 50 in the UK and they collectively posses personal assets to the tune of £5.16 trillion, more than the Gross Domestic Product of every nation in the world apart from the USA. However, the ‘golden greys’ are discriminated against by most mainstream motor cover providers who claim that accident rates increase with age.

Changing perceptions

Typically older people have a harder time finding competitive deals on their motor insurance. According to a recent survey by independent online price comparison and switching service uSwitch.com, a quarter of those aged over 75 fail to even obtain a quote for their car insurance.

However, intune is hoping to redress the balance by offering older drivers bespoke policies with lower premiums. Anne Grahamslaw, managing director of intune, explained that the company is looking to change the perception common among general insurers that the over 50s market is made up of one “amorphous lump”.

“This idea that there is a ‘grey market’ is insulting,” she told the Financial Times. “Age shouldn’t matter. We want to make access to financial services suitable to this market and transparent. Older people are doing more these days.”

In response to the launch, Aron Thompson, head of insurance at uSwitch.com, commented: “With more than 20.3 million people over the age of 50 in the UK, it is no surprise that new entrants are coming to market to tap into this lucrative ‘grey pound’”.

Competition

The new policy from intune is not the only insurance choice available to older drivers. Over 50s expert, SAGA, offers very similar cover as do several other firms, and added competition is likely to reduce car insurance premiums without compromising the quality of cover.

“We always urge consumers of any age to make sure that they look around for the best deal, and find the insurance that is most suited to them,” continued Mr Thompson. “Older drivers should keep in mind that there are several providers that specialise in this area such as Castle Cover, Age Concern as well as SAGA and intune, so it’s worth shopping around.”

He went on to warn that car insurance premiums are dependent on many factors other than age, such as car type and location.

The relative lack of insurance options for aging drivers is something that is slowly being addressed by the wider industry as well. The Association of British Insurers, the insurance industry’s main trade body, recently said that the upper age cut-off has increased from 74 to 82. Representatives from the ABI are currently investigating ways to make it easier for elderly people to obtain insurance.

Car insurance companies offering customers eco-friendly policies are raising their premiums by as much as 44 per cent over standard policies, according to new research by moneysupermarket.com.

It is becoming increasingly vogue for insurers to offer so called ‘green’ deals which include a stack of environmental bonuses such as carbon emission offsetting and discounts for eco-friendly cars.

A recent survey conducted by Prudential found that one in five motorists suffer from “green guilt”, and that men and those living in the south worry the most about the effect they have on the environment.

There are currently 30 million vehicles on the road in the UK and 74 per cent of motorists find it necessary to drive every day. Eco-friendly car insurance seems like the perfect way for those with worries to assuage their guilty consciences.

However there is often a financial sting in the tail of green premiums.

CIS offers to offset 20 per cent of its customers’ carbon emissions by investing money into renewable energy sources and reforestation schemes, but insurance for a typical Ford Focus driver is 21 per cent more expensive than the cheapest policies on the market.

Similarly More Than, of Royal & SunAlliance, offers discounts to motorists driving hybrid cars. Average coverage for a Toyota Prius hybrid car costs £597, however with Liverpool Victoria (LV) car insurance, the same vehicle would only cost £416 to insure. More Than charges 44 per cent more than LV.

Richard Mason, director of insurance at moneysupermarket.com, commented: “Drivers are increasingly concerned about their impact on the environment and in an effort to ‘go green’ may be tempted to opt for eco-friendly car insurance.

“But until insurers make green premiums more competitive, my advice is to shop around for the cheapest deal that meets your needs and give some of the money you save direct to eco-friendly causes,” he continued.

“Not only will you have the peace of mind that your charity is receiving the money directly, but you will get value for money on your policy.”

More Than recently introduced two new green insurance products as part of the government’s ‘We’re In This Together’ campaign encouraging consumers to fight climate change.

The first is a new policy that implements global positioning system (GPS) technology to monitor a motorist’s driving habits. A GPS device installed in the car will help reduce carbon emissions and fuel consumption by measuring speed, revs, acceleration and other factors in order to advise the driver on how to travel more efficiently.

The second is a new discount for all eco-cars such as hybrids, electric and alternative-fuel vehicles of up to 15 per cent, plus free carbon offsetting on 3000 miles worth of travel.

However Mr Mason has prompted More Than and other insurers to offer more competitive green premiums.

He pointed out that More Than “are in many cases very competitive for normal car insurance” and urged them to “review their premiums for eco-friendly cars”.