Car Insurance Premiums Calculations With Detailed Examples


A Typical Premium Breakdown

Step Factor Premium Type
Base Premium 750.000 £750.00 F
Driving District 0.980 £735.00 *
Theft District 1.000 £735.00 *
Vehicle Group 0.810 £595.35 *
Vehicle Age 1.060 £631.07 *
Vehicle Security 0.875 £552.19 *
Class Of Use 1.050 £579.80 *
Youngest Driver (35) 1.357 £786.78 *
Most Inexperienced Driver 1.000 £786.78 *
Most risky occupation 0.945 £743.51 *
Most risky employer's business 0.974 £724.18 *
Conviction - SP10 - 12/Dec/2019 1.100 £796.60 *
Mileage 0.938 £746.89 *
Pet ownership not a rating factor for this scheme 1.000 £746.89 *
Vehicle Value 1.000 £746.89 *
Voluntary Excess 0.860 £642.33 *
NCD 0.410 £263.35 *
New Business Discount -5.000 £250.19 %
All Steps Completed

Endorsements
============
E1 - Third party liabilty for proposer driving other cars included.


Premiums
========
Nett Premium = £250.19
Broker Commission Rate = 12.50%
Broker Commission Amount = £31.27
Gross Premium = £281.46
Insurance Premium Tax = £28.15
Total Premium = £309.60
Quotation Status:Completed

Car Insurance Premium Logic

This site aims to explain how car insurance premiums are usually calculated in response to repeated questions on various internet fora such as
  • I added my mum as a driver and the premium went down.

  • Why is someone quoting £300 and someone else £1200?

  • Why is my renewal premium higher than my first year's premium?
Unlike a price comparison site, this site uses simulated quoters which means that as well as showing the final premium it can show how that premium was calculated.

The insurance industry is quite cautious and I know that some people question the reliability of the calculations on the basis of how can they say that I am high risk because of my occupation, age etc.

It is quite clear that on an individual level it is impossible to say that someone has a type of behaviour because they fall into one quite wide category.

Equally it is true to say that historically publicans as a group were more likely to drink and drive than many other occupations and that all insurance premiums are calculated on averages.

Of course whether it is fair or not won't help you if you want to try and argue with a price comparison site.


Quick And Easy

catoonised car Follow the link below and fill in the risk screen.

Then press the GET QUOTE button and you will see a page that is similar to those shown by the price comparison sites except that you can expand the results to get the calculations that created the premium.

Please note that this site isn't designed to take your exact circumstances into account as that would require the exact quoters from the insurance companies and this information is private and confidential.

To make getting started/having a play easier to the left of the risk screen there are a number of buttons that will fill in the form with risk details that are meant to illustrate significant points.

Are The Quotes Accurate?

Some cash on a leather background
The quotors used on this site are not real live products but they are realistic and undertake the steps that a real insurance scheme would typically make. But they use numbers that are similar to but not identical to schemes live in the market.

To make data entry easier options for certain risk factors such as vehicle and occupation are a tiny subset of a the live ABI lists but they have been chosen to represent a significant cross section of the insurance significant factors.

For example a Publican is a different risk to a Computer Programmer but a Computer Programmer is virtually the same risk as a Computer Operator or an Admin Manager.

Equally a Ford Fiesta 1.1 is virtually the same risk as VW Polo 1.0 or a Vauxhall Corsa 1.1.


Premium Breakdown Explained

Image of the premium breakdown I have got my premium breakdown what does it all mean?

Most insurance companies operate schemes, schemes are targeted at a sector the market such as young drivers, safe drivers, classic cars or drivers who drive during quieter parts of the day. Most insurers will have multiple schemes in the market at the same time.

Generally insurers operate schemes so that they can calculate the likely costs of claims and budget accordingly and offer the lowest price to the type of customer that scheme is aimed at.

These schemes are why you sometimes see on the price comparison sites an insurance company offering more than one premium where one is competitive and the others are not.

As these schemes are all about averages different ways of calculating the cost of claims can result in very different premiums.

You could offer everyone the same premium regardless of the risk they represent, if you did this the safer drivers would be subsidising the more risky drivers.

You could offer a low starting premium in the calculation and then load it very heavily for the risky driver.

You could offer a high starting premium in the calculation and then load it very little for the risky driver.

All of these options and other will give very different premium for an individual whilst covering the cost of the claims.

Each of these steps is explainded here.

Declines And Silly Premiums

A 13k premium

As a scheme is targeted at a particular type of driver how should an insurer respond when a driver is a not suitable.

There are two options, one is to quote a premium that is uncompetitive often to the point of being apparently silly.

The other option to decline, to not offer a premium at all.

The exact point where to draw the line is often unclear, for example a safe driver scheme would probably decline someone with an IN10 (driving without insurance) conviction last year as this suggests a high risk.

But they may accept the risk and load the premium a lot if the conviction was 1 year ago and add a smaller load if the conviction was a longer time ago.

So someone with a No Insurance (IN10) and a Drink Driving (DR10) conviction may find that the loading for either of these convictions makes the premium high and for both of them apparently daft, nobody would pay that. Which is the point as far as that scheme is concerned.




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