Although it has taken some time to reach China, the liberalisation of motor insurance has become the standard way vehicles are insured across the globe. It means that the pricing structure is changed so that risks are reflected, and rates are differentiated for both good and bad. It makes premiums fairer for drivers, as there are more factors to be taken into account when generating a rating. It also creates a much healthier market with better competition which means companies need to improve their services, expand their product ranges and provide competitive motor insurance prices to stay in the market.
An in-Depth Explanation
Like other countries, motor insurance products were previously dictated by the motor tariff, which had been in effect unreviewed since about 1978. This now means individual insurance companies are free to set the pricing structure and use various risk factors and market competition to determine coverage terms and conditions of a motor insurance policy, making it a lot fairer. The pricing and product structure is no longer set and standardised so that customers will find different deals available across other insurers. It also rewards good risk drivers by offering lower premiums and differentiates the fact that there are good and bad risks rather than lumping it all into one.
Motor Insurance Premium Calculations
When it comes to how vehicle insurance premiums are calculated, the industry standard works on a pooling concept. This means a group of risks deemed to be similar in nature are pooled. With the liberalisation of motor insurance ratings in China, consumers will have access to this structure, and these similar risks will be brought together into what they deem granular pools. As a result, a price can be arrived at that more fairly represents how the risk presents. It also enables other factors to be put into the calculations to ensure that premiums are fair and representative of risk. Previously the vehicle’s age, the driver’s age, the size of the engine and the insured sum were the prominent calculating figures. all of those remain relevant with liberalisation. Still, there is more scope to further change premiums by looking at other factors. For example, the driver’s age also determines driving experience, and things like the use of a black box can assess driving behaviour. How often the vehicle is going to be used is another consideration as someone who spends their life driving differs significantly from someone who uses a car occasionally at the weekend. The safety ratings of each vehicle can also be considered, and this might be another strand of the make model and age of the car. Insurers can also take into account things like traffic offences, so quotes become much more tailored and much less generalised.
Some Trends in a Liberalised Vehicle Insurance Market
For most adult life from the age of legally driving to about 50, the trends suggest premiums generally decrease over time. This represents the driver gaining more experience on the road, with new and younger drivers, particularly those under 25, having the highest premiums and deemed the most dangerous. Assuming no claims are made regularly, the renewal of premiums should start to decrease as experience goes up alongside age. Once an adult driver reaches the age of 50, you may expect to see a marginal increase because, at that age of life, vehicles are often being used by their children who are learning to drive and, once more, putting an inexperienced driver behind the wheel. When it comes to the vehicles themselves, newer cars tend to be cheaper to insure when compared to older vehicles, and this is thought to be a reflection of increasing safety precautions and better build techniques from the manufacturers. Regular commuters or those who spend many hours on the road would invariably see higher premiums than those who only use the car occasionally.
Better for the Consumer
Liberalisation of motor insurance ratings is, therefore, a positive thing for the consumer. That will be more insurance companies offering different products, and consumers should take the time to compare what is being provided carefully. You mustn’t just look at the price but consider what is being offered in terms of protection and the full policy conditions. It should then become easier to find something that meets your needs. It is also worth looking at the insurance company’s reputation and how they handle claims and customer service before deciding where to buy your insurance.
But the fact that there will be a much more comprehensive range of insurance products on offer means you can more closely find something that matches your need and not end up paying over the odds because you have been lumped in with bad risk drivers when, in fact, you are the opposite. As previously mentioned, telematics or black boxes can be fitted to cars which provide vital information to calculate insurance premiums accurately. For example, the technology can determine how far and how often the vehicle is being used and the driver’s behaviour, meaning that drivers and those who use their vehicle less will enjoy lower premiums than others.
All of this means that consumers can positively influence the premiums they are offered with features such as anti-theft devices, choosing cars that attract lower premiums, making use of telematics, and ensuring that the vehicle is always left in a secure parking facility when they are not able to use it.
