EVs are much more likely to be written off if damaged (for Craig's feature in CD 193)EVs are much more likely to be written off if damaged (for Craig's feature in CD 193)


Car dealers counting the cost as fraud and ghost brokers push up price of motor trade insurance

Dealers are having to dig ever deeper for their policies, with premiums rising by 40% on average. We look into the reasons why it’s getting increasingly expensive for them.

Time 5:41 am, April 14, 2024

Car dealers across the UK are facing higher insurance premiums than ever following a wholesale rise in premium costs, along with a larger amount of misrepresentation in claims and policy details.

While non-trade consumers have seen premiums rise by over 48% on average since 2021, premium increases in the motor trade have generally been a bit lower – but they have still seen a 40% rise.

According to comparison site Utility Saving Expert, the current average motor trade insurance premium in the UK cost £776 by the end of 2023, compared with £554 in 2022.

Many traders, particularly those in high-risk areas, are paying much higher premiums than that, however, with some insurers even refusing to offer motor trade cover in ‘blackspot’ areas, such as those where ‘cash-for-crash’ scams are common.

‘Due to cash-for-crash claims, some areas are becoming increasingly difficult to obtain competitive quotations for,’ said Michael Peacock, sales director at market broker Jensten Motor Trade.

‘Some example postcodes for this include B25, B34, B8, BD7 and BD3. Unfortunately, motor traders within these locations are finding it increasingly difficult to manage the costs of insurance.’

Crash for cash licence free (for Craig's feature in CD 193)

Cash-for-crash claims are making it difficult to get competitive quotes in some areas. (Picture posed)

Another reason why traders are having to pay more to insure their stock is the vast increase in car values and the cost of repair when damage does occur.

Grant Richards, a motor trade and fraud adjustment specialist who works for a claims management company in the Midlands, said: ‘One thing we’ve seen a lot of in the past couple of years – and certainly since used car prices increased during the pandemic – is the value of claims has shot up.

‘Cars are more expensive than they were and that means claims are, too. When they’re written off, insurers are paying out against a higher valuation.’

But despite car values increasing, the number of cars written off per year remains as high as ever, with almost 400,000 vehicles (or 1 in 83 cars) being written off each year.

‘It’s the expensive, newer vehicles that have the biggest impact, and many of them are uneconomical to repair as they’re so much more expensive to get parts for – electrical systems and vehicles with a battery-electric powertrain in particular,’ said Richards.

‘The fact remains that the cost of claims, be it for write-offs or repairs, has gone up. Insurers work on a basis of actuarial risk and have profit margins factored into that, so it’s no surprise that these extras costs are absorbed by the customer.’

Richards also observed that a number of motor trade insurers are now getting quite particular about proof of trading following a surge in the number of ‘ghost brokers’.

‘People take out a motor trade policy and then use it to put multiple cars on it so they appear on the Motor Insurance Database (MID), with some even going as far as to operate as fake brokers themselves.

‘It’s an increasing problem so don’t be surprised if your insurer wants to see proof of sales or working in the trade before offering you terms.’

Rob Creedon, the managing director of Jensten Motor Trade, said: ‘Once ghost brokers are discovered, the policies and MID access are cancelled, and this can also result in customers’ vehicles being removed from the MID and the individuals being stopped by the police.’

This article appears in the current edition of Car Dealer – issue 193 – along with news, views, reviews and much more! Read and download it for FREE here!

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