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article imageOp-Ed: Car insurance premiums are about to get worse, globally

By Paul Wallis     Sep 13, 2010 in Technology
In a time when dollars are becoming endangered species in people’s bank statements, another form of “bracket creep” which usually goes unnoticed, car insurance premiums, has been a persistent needle for many, and there's another hike on the way.
Current industry information indicates that the situation is likely to get worse. This is a major consumer issue, and it’s a good illustration of business concepts which are costing a crippled global economy a lot of cash that would otherwise be creating jobs.
One of the reasons for the endless rises in car insurance premiums is the nature of the industry. This is a highly administered, bureaucratic system in which costs are absorbed by consumers at all levels. Where other industries have streamlined and modernized, insurance has retained its old “fine print mode” which costs money even to put into contracts.
The result has been a complex, top heavy sector which has the social sensitivity of Wall Street and the credibility of the US health sector.
This is a global phenomenon:
From India comes this review of a payout approach. The substance is that the Indian car insurance companies cover their actual payouts and costs plus a 100% profit.
In the US, low premiums for the Toyota Prius are about to be phased out. The reason is cost of repairs, in this case. The stated reason is that the high tech cars are about 6.5% more expensive to fix. This is despite the fact that the Prius is a popular car, widely distributed, and the fact that Toyota is believed to be listed in the phone book, and real costs could be easily checked. The cost of parts is derived from the manufacturer, not a repair shop spreadsheet. In other words the consumer is paying for perceived costs which are notional, not necessarily bona fide expenses.
As these stories indicate, the general process of car insurance premium assessment is pretty much the same, around the world. All costs are passed on, and those costs are high.
Things may be about to change, however. A new Australian insurer, Youi Car Insurance, has a fully online, customizable car insurance policy. They’ve created a DIY car insurance package you can manage for yourself, tailoring your policy in relation to car usage, and with a few added benefits like accommodation, replacement vehicles, and other useful add-ons you can get if you want them.
(The name Youi has another meaning for Australians- "Doing a Youi" means doing a U turn. May turn out to be very appropriate.)
The difference is that this is a New Economy business model. Youi have slashed their own overheads, drastically, simply by not operating the way the others operate. This is a typical case of New Economy vs. Old Economy, and the Old Economy never wins. (It’s roughly the equivalent of Old Media vs. New Media, in terms of efficiency.)
Market penetration in Australia has been pretty good since Youi started up a year or so ago, particularly in terms of a new company competing with long established insurers.
Now may be the time to start getting fussy about your car insurance.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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