How car insurance bands affect premiums
If you’re in the market for a new car its worth thinking beyond the retail price alone and considering how much the car will cost in the long run. One element that should not be overlooked is car insurance but how can you know how much a car is likely to cost to insure before you buy?
This is where car insurance bands (also known as car insurance groups) are so important.
What are car insurance bands?
Car insurance bands are established by the Group Rating Panel, which includes members of the Association of British Insurers (ABI) and Lloyds Market Association. They recommend a car insurance group for each new passenger car when it is released in the UK based on research conducted by the Motor Insurance Repair Research Centre (Thatcham).
Vehicles are assigned into groups ranging from 1-50 (previously 1-20) with cars in the highest groups likely to cost insurers the most in insurance claims. With the ABI claiming that the cost of motor vehicle repairs accounts for more than half of all the money paid out in car insurance claims it’s no surprise that when a car appears in a higher group, its owner typically faces higher premiums.
What factors influence these car insurance bands?
Among the factors considered by the panel are:
- New car values: The price of a new car is often indicative of how much it would cost to repair/replace.
- Damage and part costs: The cost of parts involved in repairing a vehicle.
- Repair costs and times: Longer repair times typically mean higher costs so even elements such as the paint finish on a new car could be factored in.
- Price of parts: The panel looks at the cost of 23 standard parts comparing one manufacturer to another – the lower the cost, the lower premiums should be.
- Car security: Security features reduce the risk of theft and therefore lower the chances of a car insurance claim being made.
- Car performance: According to claims statistics, high performance cars are most regularly involved in high cost insurance claims and so the acceleration and top speed of a vehicle are taken into account by the panel.
To illustrate the difference that the performance capabilities of a car can make to its insurance grouping we compared two 2009 Ford Fiesta EDGE models using the ABI database. The model with a 1388cc engine appeared in group eight; whereas the same car with a smaller engine – 1242cc – was classified in group six.
The differences are even more pronounced if you drive a high performance car. For example, high performance models such as the Porsche 911 Carrera 2S Cabriolet and Coupe with its 3800cc engine are classified in group 50 – the highest insurance group.
Its safe to assume therefore, that the long term costs of owning high performance vehicles quickly adds up. Generally, cars with high performance engines are not only classified in high car insurance groups but also appear in high vehicle excise duty bands too because of their emission levels.
What about modifications?
If you’re looking to save money on car insurance then you should also steer clear of modifying your car. Generally, modifications will add to your premiums because they increase the value of your car and make it more costly to repair in the event of an accident.
For example, we researched quotes for a 28-year-old male driver from Cheshire with a 2006 Ford Focus Zetec, a five-year no-claims discount and a voluntary excess of £250. Without modifications he was able to pick up a comprehensive car insurance quote for just £503.90 a year. However, by simply adding non-standard alloy wheels to the same driver’s car his cheapest quote increased to £668.50 a year. The difference is even more pronounced if flared wings are the extra added to the car – then the cheapest car insurance quote rises to £720.73 a year.
What other factors influence car insurance quotes?
Insurers base their premiums not only on the vehicle itself but also on criteria relating to you – such as your driving record; your address; your annual mileage; and your personal circumstances. Here are some tips to bring your insurance costs down:
- Be safe: Drive carefully and avoid accidents and convictions to build up a no-claims discount.
- Be secure: Park your car in a locked garage overnight and invest in insurer approved alarms and immobilisers to reduce the risk of theft.
- Increase the excess: Raising the voluntary excess will usually lower premiums but keep it at a level you can comfortably afford.
- Limit your mileage: The fewer miles you drive the less likely you are to be involved in an accident so consider capping your mileage.
- Pay annually: Pay your car insurance premiums upfront to avoid monthly interest charges.