How September 11 could affect your premium

We only have to watch the news to see what impact the events of September 11 have had around the world but we could soon be feeling the effects closer to home in the form of much higher insurance premiums.

The terrorist attacks on the United States have thrown the insurance industry into one of the biggest crises it has ever faced and that means just about everything is set to become more expensive to cover – including bikes.

Industry insiders and experts are predicting some premiums could rise by as much as a third. But whereas in the past insurance price increases have come with little warning, this time we know they’re on the way. And that means there are things you can do to ensure you’re not faced with a bleak discovery come renewal time.

Garel Rhys, a professor of motor industry economics at the University of Cardiff, explained why the terrorist attacks will affect bike cover.

He said: ” The insurance industry is still trying to calculate the massive cost of liabilities resulting from the attacks. What happens when the industry faces huge claims in one area is that the cost has to be cross-subsidised by other areas. One of those areas is motorcycle and car insurance.

” It may seem unfair, but this kind of cross-subsidising is normal. The reason motorcycle insurance is one of the areas affected is because to a certain extent it’s inelastic – a lot of people will always buy it, whether the price goes up or not.

” Insurance companies use crises like this to make price increases they wouldn’t otherwise have been able to get away with. ”

Norwich Union, the UK’s leading bike insurer, played down claims that big price increases are on the way, but refused to confirm they’re not. A spokesman said: ” It’s unlikely, but too early to say. We can’t rule it out. ”

But one insurance industry insider, who wished to remain anonymous for fear of recrimination, said: ” Many policies may go up by as much as 35 per cent. ”

Rhys believes that figure may not be an exaggeration, but thinks there are things you can do to ensure you’re not one of the people who has to cough up.

He said: ” I think it’s likely that some policies will go up substantially. At the moment, I’d be hard pushed to think of a front-line insurance firm which won’t be hit by the cost of the attacks.

” But it’s possible that some will not be hit as hard as others. That means that some will have smaller losses to cross-subsidise, and will therefore be less inclined to charge you more.

” As always, you should shop around to ensure you get the best value for money. The problem is, we all know that, but we still wait until a renewal notice pops through the letterbox telling us our premiums have gone up before we do anything about it. By then, we’ve got very little time to get a better quote. ”

Rhys thinks we should take advantage of the fact that we have advance warning of the price increases by using the time to find the best value policy we can.

He said: ” Pre-empt it. Get lots of quotes well in advance of your current policy expiring. That way, when you’re renewal notice arrives, you’ll instantly have something to compare it to. ”

The Association of British Insurers (ABI) agreed that some insurance companies may be hit harder than others.

ABI spokesman Malcolm Tarling said: ” It’s only reasonable that heavy losses will have to be recouped from somewhere. Some of the bigger insurers, such as, AXA and CGNU, of which Norwich Union is part, may have suffered heavy losses due to the fact that they have lots of overseas business. But some other insurers, such as Churchill and CIS, may have smaller losses by virtue of the way they’re organised, with less overseas exposure. ”

And that’s backed up the firms themselves. Churchill’s Marie Dyne said: ” Generally, there are going to be repercussions with all insurers. But companies with lots of overseas business will be more affected than Churchill, for example, which only insures in the UK. ”

And CIS’s Duncan Bowker said: ” We haven’t suffered any direct losses as we have no overseas business. But that’s not to say motorcycle insurance won’t go up. We’re affected indirectly because the rates of reinsurance has gone up. ”

Reinsurance is insurance for the insurance firms – if one of them is hit by heavy losses, it can claim from a fellow insurer, thus spreading the burden between them.

That means going to a company with no overseas exposure is no guarantee of a lower quote – you should still shop around, using classified ads in MCN Bikemart and competitive on-line insurance brokers such as Hanson & Robertson Insurance Services at www.insurance2000.co.uk

Warren Dickson of insurance brokers Carole Nash has more advice. He said: ” I can’t stress enough that you should always go to a specialist insurance broker. We’ll search a panel of insurers for you and give you the most competitive quote. ”

Insurance is all about minimising the loss from unexpected events. The September 11 attacks proved you can’t make allowances for everything, but paying for your insurance is something you can prepare for now.